RAPAPORT... The epitome of glamour, rare jewels of the world and unparalleled luxury, jewelry retailer Harry Winston is the standard against which all other diamond jewelers are measured, but an era ended when Canada-based Aber Diamond Corp. acquired the remaining minority interest in the retail operation in September 2006. Ronald Winston, son of the legendary Harry Winston, and Fenway Partners, a private equity firm in New York City, sold their 49 percent stake to Aber for $157 million.
In April of 2004, Aber purchased 51 percent of Harry Winston for $84 million, with Ronald Winston and Fenway Partners retaining 49 percent of the shares. Aber had the option to buy out the remaining shares by 2010, but chose to make the deal last month. Ronald Winston has had controlling interest in the firm since the mid-1990s, when, after a bitter legal battle, he — along with Fenway Partners — bought out his brother Bruce Winston’s interest in the company. In the current deal with Aber, Ronald Winston will continue with the company in the role of honorary chairman and consultant.
“The deal with Aber provides immortality and continuity for the company and a good confluence of mining and retail,” comments Winston, 65, who has a two-year-old son, Blaise. Winston notes that he might have felt differently about this deal had he had a child earlier. “It had to happen. I can’t run the company forever. It’s in good hands now. It will be 25 years before my son decides what he wants to do. If I’d had a family earlier, it would be a different story, but I’m happy with this deal because I know that Winston will continue and it’s what I want and what my father would want.”
This isn’t the first time the industry has seen a mining company and a retail operation connect. Several years ago, Tiffany made a deal with a Canadian mine and according to Winston, Tiffany made a “stock killing” in the deal. “Mines are obviously a depleting asset. In Winston, Aber has an asset that doesn’t deplete,” says Winston.
BRAND EQUITY
Part of the exclusivity of Harry Winston has been in its limited locations — eight at the time of the initial sale. Aber has an aggressive expansion plan of up to 45 stores, with 12 stores currently open.
“There’s going to be a limit to how many Winston stores you can have and how many great pieces you can have,” remarks Winston. Yet, the watch business says otherwise; the brand has its watches in 138 locations. “I thought watches were like diamonds. We started the watch business with no business plan, promotion or advertising,” recalls Winston, “and yet, it has succeeded and that is a tribute to the name.”
And these days, a name is important in the luxury market. It is, in fact, one of the biggest changes that Winston has seen in his years in the business. “More brands are coming into the market and more people are wanting to be jewelers. Consumers are more aware of big names,” he says. “People want to own a name, it’s a validation for them. It’s the worldwide trend in luxury right now.”
Sitting in his Fifth Avenue and 56st Street office in the New York City flagship store — which has been in that location since 1960 — Winston asserts that Harry Winston is the only real American luxury brand. His grandfather started as a jeweler in New York in 1890. Harry Winston opened his first ground-floor retail store in 1940 on East 51st Street.
It is his feeling that with so many new jewelry brands on the market, there will be a sorting out, with some surviving and others not.
The question that comes to mind regarding Harry Winston is will a diamond mine be able to maintain the spirit and soul of the venerable retailer, which is at the core of the brand?
“The mine will become Winston and Winston will become the ethos,” predicts Winston. “All diamonds come from mines. If the PR is done right, you keep the glamour; you don’t have to worry about the mud from the mine, it’s all a question of spin.”
One of the most visible forms of promotion for the brand has been its presence on the Red Carpet, a tradition that started when Harry Winston loaned his movie-star friends jewelry back in the 1950s. There was a lull in the activity and then about 25 years ago, Ronald Winston reactivated the Harry Winston Red Carpet presence.
“I loaned jewelry to Brooke Shields, Madonna, stars that I knew personally. It added more than fashion to the clothes. At that time, it was all about Bob Mackie and the clothes,” explains Winston. “But now, it’s out of hand. It’s great payola. It’s not what I wanted it to become. We’re waiting for things to settle down again before we loan out jewelry.”
Of course, loaning jewelry is fraught with difficulties and perhaps, some of the most notorious press came for the firm when Sharon Stone was loaned a $500,000 necklace that she believed was hers to keep. “I delivered the necklace to her personally, and out of respect to her and because we were friends, I didn’t get a memo,” recalls Winston. Stone eventually returned the necklace and sued Winston for $12 million, claiming that she and Winston had a verbal contract that allowed her to keep the necklace for wearing it to an event. She never showed up in court and the case was thrown out. The two eventually settled the suit by donating money to an AIDS charity that they both support.
AMAZING GEMSAn avid fan of colored diamonds, Winston relates that one of the best moments for him came when he got to hold both the Hope Diamond and the Dresden Green Diamond in the Smithsonian — where he donated $1 million to create the Harry Winston Gallery in the Great Hall of Gems — on his birthday. He considers those to be two of the most amazing diamonds he has ever seen. He also claims the Pumpkin Diamond — a fancy intense orange color diamond that he purchased from Sotheby’s in 1997, two days before Halloween — as a favorite.
Although Winston has sold his interest in the company, retirement is not in his plans. He has an exploration firm that was exploring for diamonds in Sierra Leone and, instead, found gold. While Winston was disappointed that the find was gold and not diamonds, the mine is proven to have one million ounces of gold and it could yield as much as two to three million ounces. He cites a long relationship with the country of Sierra Leone.
“I’ve had a relationship with the people of Sierra Leone since the 1950s. They made a postage stamp in honor of my father,” says Winston. “We feel that by developing opportunities there, we will be helping them. When we actually start producing, we will build hospitals and things they need.”
While the company is no longer owned by a family member, Winston has arranged for its legacy to live on. In his contract with Aber, there is the “Blaise Winston Day” clause. One day a year, his son gets to come in to the firm to learn about gemstones and jewelry. This way, it is assured that the heritage of the name will continue with the fourth generation involved in the business.
Article from the Rapaport Magazine - October 2006. To subscribe click here.