Hearts on Fire sale shows the importance of brands

Fire will open shop-in-shop and counter-in-shop models in Chow Tai Fook stores in mainland China, Hong Kong and Macau. Capeci said there is no firm number as to how many Hearts on Fire stores they’ll open in China though she notes that Chow Tai Fook “moves pretty quickly.” 

In the U.S. market, Hearts on Fire is pulling back on its strategy of opening standalone stores (the brand currently has two here, one in Las Vegas and one in King of Prussia, Pa.) to focus on independent retailers. 

Capeci said they have about 350 retail locations in the United States and are looking to open more as they streamline their focus and the new partnership with Chow Tai Fook fuels interest in the brand. 

“We know we are going to be growing. The next couple of years is going to quite an incredible cycle of growth,” she said. 

Hearts on Fire, however, doesn’t have a firm number of doors it is looking to open in the United States. 

Details regarding the future of Hearts on Fire’s manufacturing still are being worked out, Capeci said. The company currently has vendors in the United States and in Asia. 

What is known at this point is that Hearts on Fire will keep its engagement ring manufacturing in the United States because they need to be able to deliver rings to the retailers here within two weeks while the jewelry sold in China will be made in China.

The branding game
For Chow Tai Fook, the proposed Hearts on Fire purchase is a chance to snag a well-established brand in the jewelry industry.  

Jewelry is an industry where both tight margins that leave little room for marketing and, for diamonds specifically, getting consumers to connect with a story beyond the Four Cs make branding more difficult, said Howard Feller.

Feller is a partner at MMG, an investment bank specializing in fashion and fashion-related mergers and acquisitions and advisory services. Earlier this year, MMG worked on the deal that will bring a Marchesa-branded line of fine jewelry to Macy’s this holiday season.    

“Anything they (companies) can do to take the risk out of putting an untested brand in the store, they’ll do,” he said. 

With its planned purchase of Hearts on Fire, Chow Tai Fook becomes the industry’s latest major player to snatch up a brand. 

In 2013, Swatch Group paid $1 billion for the venerable Harry Winston name and network of retail stores worldwide. 

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Two of the world’s largest and most successful luxury goods companies, LVMH Moët Hennessy Louis Vuitton and Kering (formerly PPR), are comprised of long-established brands in various industries, with some of their most recent acquisitions coming in jewelry. 

LVMH bought Bulgari, a brand with hundreds of years of history, for $5.17 billion in 2011 and Kering purchased a majority stake in Pomellato last year. 

Judith Ripka also is no longer solo. In April, a brand management firm called Xcel Brands Inc., which also owns Isaac Mizrahi New York and Liz Claiborne New York, paid $22 million to add the jewelry company to its portfolio.

In addition to speaking to the growing importance of brands, Feller said Chow Tai Fook’s acquisition of Hearts on Fire also gives the company a foothold in the U.S. market. 

While the Chow Tai Fook stores are in Asia, owning Hearts on Fire would give the Hong Kong-based company a chance to learn more about the U.S. market and how brands work here. Chow Tai Fook could apply these lessons in Asia or even use them for future acquisitions in the United States, Feller said. 

Chow Tai Fook said it has no plans for acquiring any more companies in the U.S. market, at least not right now. 

“Our main focus remains on our existing business in greater China, and currently we are not considering any more acquisitions of U.S. companies in the jewelry industry,” Kent Wong, managing director of Chow Tai Fook Jewellery Group Ltd., said in an email. “However we are open to every opportunity that might benefit the company’s long-term development and enhance shareholder returns.”