Feroce departure start of layoffs at Alex and Ani

THE SURPRISE OUSTER of Giovanni Feroce as CEO of Alex and Ani now appears to have been part of a larger shakeup at the rapidly growing lifestyle brand. / PBN FILE PHOTO/TRACY JENKINS
THE SURPRISE OUSTER of Giovanni Feroce as CEO of Alex and Ani now appears to have been part of a larger shakeup at the rapidly growing lifestyle brand. / PBN FILE PHOTO/TRACY JENKINS

The surprise ouster of charismatic CEO Giovanni Feroce in March was the start of a larger, organizationwide shakeup at Alex and Ani LLC than company leaders have acknowledged, according to former employees.
Between Feroce’s departure and early last month, at least 40 Rhode Island-based workers were let go, three ex-Alex and Ani workers have confirmed.
Those terminations included four C-suite executives – the chief operating officer, chief strategy officer, chief technology officer and chief financial officer – of which only the CFO has been replaced.
The precise number of layoffs is difficult to pin down because Alex and Ani has declined to comment on any of them, even as the company last month touted plans to add 70 new employees to Cranston corporate headquarters, and another 180 in stores across the country, over the next six months.
Spokesman Gregg Perry did not say how many of those 70 new employees have been hired so far, but acknowledged that it was not a net total and some new hires are replacing those lost through “attrition.”
At a company with global growth aspirations like Alex and Ani, the departure of a high-profile leader is often likely to bring additional personnel changes with it, especially among the managers hired personally by the outgoing executive.
But with company founder Carolyn Rafaelian still acting as interim CEO four months after Feroce left, the level of senior-executive turnover raises questions about whether the company has the management experience needed to execute a rapid growth strategy, including entry into new markets and product lines.
And that doesn’t include a potential IPO, which Alex and Ani has reportedly been exploring for more than a year.
“I am a little surprised Carolyn has stayed in the CEO position this long,” said Mark Higgins, dean of the University of Rhode Island’s College of Business Administration. “This is unusual for it to take so long to replace a CEO. Normally, if you were going to make this kind of change, you would have had someone in mind to replace him.” The fact that a replacement was not lined up to replace Feroce could indicate that the leadership change was a quick decision, Higgins said.
Regarding the company’s decision not to replace the other “C-suite,” positions beside CFO, Higgins said they could be filling those duties with vice presidents who could be promoted or new people could be hired, depending on how things go.
The extent of turnover at Alex and Ani has been quieted to some extent by nondisclosure and noncompete agreements former employees are required to sign as a condition of receiving a severance package.
One former worker who didn’t take a severance package because of those conditions was Michael Mota, vice president of business development at Seven Swords Media, the advertising agency purchased by Alex and Ani in the spring of 2012 and dissolved last month.
Mota declined a severance package when he was let go along with nine of 15 Seven Swords employees, because he wanted to keep working in the Rhode Island digital-media industry and a noncompete agreement would make that impossible, he said.
With Alex and Ani now contracting with a New York firm for marketing, Mota has started his own media company, Atom Media Group Inc., with the aim of picking up some of Seven Swords’ old Rhode Island-based customers.
In a recent telephone interview, Mota expressed disappointment and frustration with the way Alex and Ani handled the layoffs and, especially, the breakup of Seven Swords.
“They dissolved the entire [Seven Swords] company and they didn’t have to,” Mota said. “We were on the list of fastest-growing companies in Rhode Island and the Inc. [Magazine] 500 list in our own right. It has been a mass exodus, and they are talking about creating all these new jobs.” According to Mota, Alex and Ani was looking to jettison Seven Swords even before Feroce’s departure out of concern that owning a media company outside its core business would complicate a future IPO.
Feroce had reached an agreement to sell Seven Swords to Go Go Media Networks Inc., a Cranston digital-advertising company that provided in-store digital signs for Alex and Ani.
With Feroce’s departure, however, the sale was scuttled, and Seven Swords workers began to leave the company. Headcount at Seven Swords had been at about 35 people over the winter before dropping to 15 when the company was dissolved in June, Mota said.
Mota, who estimated that more than 50 people had departed Alex and Ani and Seven Swords since Feroce left, said he was never given an explanation for why Seven Swords was dissolved instead of sold.
Go Go Media CEO David Paolo said the deal to buy Seven Swords was so far along, its executives were already working out of Go Go’s Comstock Parkway offices, which he was in the process of doubling in size to accommodate them. He also built a television studio, green screen and audio studio.
“It was a done deal – the only things needed were signatures on the [purchase and sales agreement],” Paolo said. “Then with Giovanni’s departure, it became clear and apparent that the parties over there were going to dissolve a lot of what he had his hands in, whether it was good for business or not.”
Paolo said Go Go and Alex and Ani were both clients of investment bank Morgan Stanley, which was brokering the Seven Swords sale and working on a plan to take Alex and Ani public.
Because of the expense Go Go incurred expanding facilities for Seven Swords and plotting a business strategy around the new company, Paolo said he intends to sue Alex and Ani for damages. He said he will decline to say how much Go Go has lost on the Seven Swords deal until the suit is filed. Perry declined to comment on the discussions with Go Go Media.
As for what was going on at Alex and Ani itself during this period, Mota said in addition to the layoffs, the post-Feroce period was marked by belt-tightening at corporate headquarters.
Use of company cars and mobile phones by executives, for example, was curtailed once Feroce left, Mota said.
Reached by phone, Feroce declined to comment on the situation at Alex and Ani, including the reason he was forced out, because of the legal conditions of his departure.
Feroce was scheduled to announce his next commercial venture July 7.
As for who is steering the ship at Alex and Ani while the company looks for a permanent CEO, Mota said General Counsel Suzanne Kelly had a prominent role in day-to-day operations along with Rafaelian, something echoed by one other former employee who asked for anonymity because of a nondisclosure agreement.
Paolo said Kelly was actively involved, “unusually so for a general counsel,” in the latter stages of the aborted Seven Swords deal. He said Kelly had worked with MODCo Group, the New York firm that is now handling media for Alex and Ani.
Kelly replaced Robert Rainville as Alex and Ani’s general counsel. Rainville is suing the company for wrongful termination.
Higgins at URI said at the very least, the fact that Alex and Ani has not hired a new CEO means an IPO, if it happens, is still some time off, at least 2015.
“I can’t see an IPO with Carolyn as CEO – I don’t think the market would be comfortable with that,” Higgins said. “She would have to go before people on Wall Street and answer a lot of questions and do a road show. You have to satisfy them that you have a strategy for the company. She is not the prototypical person to do that.” •

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