Birks' US expansion through Mayors Jewelers was a value-destroying detour

Henry Birks & Sons, the century-old Canadian jeweller, wanted a US footprint. In August 2002 it invested $15.05 million for about 72% of the voting control of Mayors Jewelers, a Florida and Georgia chain that was, by Birks' own later filing, 'experiencing an unsuccessful expansion beyond its core markets and incurring significant losses' — 41 stores, losing money.

Birks doubled down. In November 2005 it completed a full stock merger, converting the remaining Mayors shares into about 1.9 million Birks shares — 16.6% of the company — for a chain then down to 28 stores. The US business kept underperforming. In fiscal 2009 Birks wrote off the entire Mayors goodwill, an $11.2 million non-cash impairment, plus $2.3 million more on US store and factory assets.

Fifteen years after the first cheque, the chain had shrunk from 41 stores to 16. In October 2017 Birks sold Mayors to UK retailer Aurum for gross proceeds of about $108 million and used the money to pay down most of its outstanding debt. The expansion had consumed a decade and a half of management attention and ended as a debt-reduction transaction.