Kay Jewelers Inc. yesterday unveiled an expansion plan that will add 15 to 20 stores a year to the nation's third-largest jewelry chain following four years without such growth.
The Alexandria retailer also said it would pursue the acquisition of smaller, regional jewelry chains during the next two to three years, particularly in Texas, California and the Southwest, where Kay is trying to enlarge its presence.
"We're looking more and more toward buying big existing chains," President Michael Lavington told a group of financial analysts.
"We're in touch with a number of small chains to fill out the number of markets that we're in," he said.
At the moment, Kay is particularly interested in chains in Houston, Tex. -- even though retail sales have been hit hard by declining oil prices. "There are a number of small chains teetering on the brink of bankruptcy. We're kind of hovering around them," Lavington said.
He said such acquisitions could prove beneficial when the economy there turns around.
Kay Jewelers, a chain of 338 stores, consists of Kay; Marcus Leased Departments, which runs expensive jewelry departments in 49 department stores around the country; and Black, Starr & Frost, which caters to the more affluent shopper.
With high operating costs, Black, Starr continues to post losses, Lavington said. Kay plans to give it "a maximum of two years to break even. If it doesn't happen, we will sell Black, Starr. There is no question that we will not continue it as a loss maker."
Lavington said the jewelry chain's expansion plans are unaffected by last week's announcement that its parent company, Kay Corp., will spin off the entire chain. Kay Corp., also based in Alexandria, owns a commodity-trading operation as well as 80 percent of the jewelry chain. The parent company sold 20 percent of the chain's stock to the public last year.
Kay Corp. wants to stimulate interest in the jewelry chain among investors and the financial community, so it plans to divest the chain, giving shareholders about a share of the retailer's stock for each Kay Corp. share owned.
The spinoff hinges on a decision by the Internal Revenue Service not to impose additional taxes on the company or shareholders.
Kay Jewelers expanded rapidly between 1979 and 1982, opening about 126 Kay stores and more than a dozen Black, Starr units. But the rapid expansion caused a $2 million loss in 1981.
Last year, the jewelry chain earned $7.5 million on revenue of $232 million.