Alex and Ani shakeup

The abrupt March 13 departure of Alex and Ani LLC CEO Giovanni Feroce may prove to be little more than natural growing pains for a company that saw a meteoric four-year growth run during his tenure, or it could signal trouble to potential investors, say business observers.
The Cranston-based jewelry and design firm has done little to shed light on Feroce’s departure or dispel speculation it was fueled by investors seeking a change.
Founder and Creative Director Carolyn Rafaelian, who launched the company named after her children in 2004, will step into the CEO’s role on an interim basis. The company announced it will seek a new chief executive “who has experience leading a fast-growing company to the next level and who can provide the strategic direction and vision that will serve us well into the future.”
For now, it remains “business as usual” at Alex and Ani, spokesman Gregg Perry told Providence Business News last week.
“The company is continuing to grow, and we are following and executing a business strategy set out by Carolyn Rafaelian and the board that’s been in place for some time to move us forward,” Perry said.
The company does not have a firm timeline for bringing in a replacement for Feroce, he added. “We are not going to rush the process. We’ll make an announcement when we find the right individual. Ultimately, the board is looking for a person that has the right synergy and experience to be able to move the company forward efficiently.”
Alex and Ani says 2013 sales reached $238 million, triple the previous year’s levels and more than 5,000 percent higher than the $4.6 million it recorded in 2010. Observers say businesses that experience such dramatic growth often require new leaders to help guide them to the next stage.
The fact that Alex and Ani parted ways with Feroce less than 18 months after announcing it had taken its first outside investment, from San Francisco-based private equity firm JH Partners, suggests those investors pushed for the change, said Mark Higgins, dean of the College of Business Administration at the University of Rhode Island.
JH Partners and Managing Partner John Hansen did not immediately respond to requests for comment.
“There is more going on than they’re letting out,” Higgins said. “If their intent is to go public, we would see more of what I would call an orderly transition. I would also expect the venture capitalists to have more comment than they have.” But Peter Dorsey, president of The Business Development Company of Rhode Island, which invests in growth-stage companies, said keeping leadership changes under wraps is not that uncommon. He said Alex and Ani’s evolution from designer of jewelry to “lifestyle positive-energy company” may mean a different type of leadership is now required.
“The strategy and mission [have] changed, so the skill set needed now is understandably different,” Dorsey said. “When you’re very young and growing fast, you can fly a little by the seat of your pants – and maybe you even want to be doing that when you are smaller and want to be agile and make a splash.”
Last April, Feroce and Rafaelian told Inc. magazine they were positioning the company for an initial public offering. The magazine reported that Feroce had begun to meet with the type of Wall Street bankers who could underwrite a debut on the stock market, possibly as soon as this year.
Other Rhode Island businesses have been through similar leadership shakeups as they have sought to grow beyond the startup phase.
Notably, IlluminOss Medical Inc. has changed leadership twice since its founding in 2007. Not long after securing its third round of venture funding, the East Providence developer of minimally invasive fracture-repair technology brought in Scott Rader as its first outside CEO in 2010 to replace founder Robert Rabiner. Rader left late in 2012 and after Rabiner helmed the company again for several months, IllumnOss tapped Dirk M. Kuyper in April 2013 to take the helm.
But in the case of Alex and Ani the lack of a clear transition plan from Feroce to his successor at a time when the company is trying to prepare itself for an IPO could be off-putting to potential investors, said Higgins.
For his part, Feroce brought nontraditional CEO credentials to Alex and Ani. A former Army reserve major and state senator and one-time state lottery commissioner, Feroce had led an eyewear company that targeted the college market before he connected with Rafaelian.
At Alex and Ani, his tenure was anything but dull. The company grew its core jewelry business rapidly – forming partnerships with Bloomingdales and Hannoush Jewelers to carry its products, even as it grew its footprint of self-branded, standalone stores to 40 shops in 11. It also struck marketing agreements with the New England Patriots cheerleaders and the Boston Celtics dancers and moved aggressively into other areas, starting a line of tea and java shops, buying Seven Swords Media and expanding it into a full-service digital marketing shop that made Alex and Ani’s 2014 Super Bowl commercial.
The company’s Rhode Island roots were also deepened under Feroce, a West Warwick native and URI graduate, with the company pledging to donate $1 million to Bryant University’s international business program, and the same amount to Rhode Island College.
Both Rafaelian and Feroce also bought Newport mansions during his tenure at the company, which also saw Alex and Ani purchase the Sakonnet Vineyards.
Perhaps the most pivotal move under Feroce’s leadership came late in 2012 when JH Partners, a private-equity firm with a broad international portfolio of high-end consumer brands, including Peets Coffee and Tea, and apparel retailer J. McLaughlin, took a stake in the company in exchange for an undisclosed investment.
URI professor of business Ken Smith said those investors likely had a hand in forcing the leadership change, and may have been worried about the firm’s feverish expansion, especially its forays into areas beyond its original successes in design and retail.
“Investors want to know, what is the strategy? What is the competence, the competitive advantage that we can use going forward,” he said. “I don’t think that’s a winery or coffee houses.”
Others see connections among Alex and Ani’s varied initiatives, which Sylvia Maxfield, dean of the Providence College School of Business, said all fall under the umbrella of design, a niche long seen as one especially well-suited for Rhode Island to compete on a global scale.
Early-stage and founding CEOs are often moved aside as businesses expand and mature, Maxfield said.
“I suspect Carolyn is a powerful force behind that company and will want to keep the Rhode Island connection strong,” she said.
BDC’s Dorsey said there may be another benefit for the state now that Feroce is currently unemployed: “He can do it all over again for someone else.” •

No posts to display