Capital Markets

CFOs React: Michael C. Fina’s Mark Ellis

Some early planning for the credit crisis is allowing the CFO of this specialty gift retailer to manage a short-term drop in revenue.
Kate PlourdOctober 1, 2008

Specialty gift retailer Michael C. Fina is exposed to Wall Street’s woes on two fronts. From the consumer side, the privately-held company — which generates revenue from the sales of bridal gifts, jewelry and fine housewares — is likely to feel the effects of Americans tightening their purse strings. From a corporate perspective, the New York-based company probably will see a slowdown in orders from Fortune 1000 companies that regularly come to Fina to purchase employee recognition awards.

While both revenue streams run the risk of decreasing in a weakened economy, CFO Mark Ellis is approaching the financial crisis as an opportunity to pull ahead of his competitors. He is focusing on the company’s long term goal: maintaining the family-like customer service focus that the company was founded on.

But there is work ahead. For example, in August, the government reported that consumer spending was flat. Nevertheless, Fina’s August retail sales were up significantly from the previous month. Then September brought a different story. By the end of the month, sales look “just horrible,” said Ellis.

“Luckily our drop-off in September did not erase all the gains that we had in our retail business,” he says. “While we’re still in the plus column, it was a dramatic shift downward. We’ve just been focused on making sure we continue to provide [a good] experience for our customers.”

Regarding its credit situation, Ellis says the company is “in good shape.” The retailer renegotiated its credit line last year when signs of a weakening economy began to appear. “We previously had a line of credit that was not a revolving line,” notes Ellis. “So we went to JP Morgan and asked for something that was more certain. They agreed to a three year revolving line. It did cost us a little more in interest and we now have an unused commitment fee, but it’s been worth it.”

Still some of Fina’s corporate clients — including Wachovia, Merrill Lynch and Citigroup — are being hammered by the credit crisis. “We’re going to see many companies contracting, and [employee recognition programs] may be an area in which they cut back on,” says the CFO. Employee recognition programs generate a significant amount of revenue, according to Ellis. “It’s hard to see into next year. While we have long term contracts with our customers there are always cancellation options.”

The specter of client cancellations and the expected decline in consumer spending have forced Fina to reduce costs. “We’re already cutting back in some of our hiring areas, and not moving ahead with some of the hires we had planned in areas like marketing and sales,” says Ellis. “[But] we’re always focused on being a good company to work for.”

Despite being concerned about the year ahead, Ellis is not allowing the economic crisis to derail the foundations of Fina’s business model. “In some ways this could be positive for us. Being in the bridal business you have more of a relationship with those customers,” he opines. “We are doubling our efforts and focusing on those relationships, as well as how to keep to our plan of providing great customer service.” In the end, “we’ll ride out any turmoil that we see in the short term.”

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