On a sunny afternoon last December, a middle-aged woman angrily walked out of 88-year-old Sherry-Lehmann, once the royalty of Manhattan wine and spirits stores. "I was shopping for a gift bottle of tequila for my boss," the woman said, as she waited to cross Park Avenue. "But the salesperson tells me there's only one bottle of tequila in stock and it costs $4,200. I like my boss, but not that much!"
Back inside the shop, another woman stands at the counter, frowning. She asks why she hasn't received an overdue $200 refund. "It takes four to eight weeks for the credit to be processed," the salesman says. He offers the woman the value of her refund in wine. But the pickings are slim: The shelves labeled red Burgundy, once lined with bottles from prestigious domaines, are vacant. Except for a bottom row of inexpensive wines, the same is true of the shelves labeled white Burgundy. And the Bordeaux selection, once vast, is gone. One vertical case, however, is fully stocked with wine bottles bearing colorful Sherry-Lehmann labels. Only when you pick up a bottle do you realize they are empty props.
The woman asking for her refund is persuaded to take several bottles of a well-known Napa Valley Cabernet Sauvignon. As she leaves the shop, an expensively dressed man strides up to the counter. "I need four bottles of Krug Champagne," he says.
"We're totally sold out of Champagne," the salesman says. A look of disbelief crosses the patron's face. He turns on his heels and departs. After he’s gone, the salesman confides, "Last year, I needed a half bottle of Krug Grande Cuvée for my aunt; it's her favorite Champagne. But we didn't have it here. I had to walk up to a shop on Lexington Avenue to buy it. Crazy!"
Once arguably the queen of wine shops in America's biggest wine market, Sherry-Lehmann is facing potential financial ruin. Several leading wholesalers tell Wine Spectator that inventory at the store is low because the company owes money to multiple distributors, who now refuse to send the store any more wine. The New York State Liquor Authority (SLA) has placed the store on a list of retailers who must pay cash on delivery to distributors because of delinquent payments. The company owes back taxes. And several customers have filed lawsuits alleging Sherry-Lehmann failed to deliver Bordeaux wines they bought as futures.
The question is: How did a store with such a sterling reputation sink so low? While the pandemic hurt restaurants, many wine shops thrived as people did their drinking at home. Did Sherry-Lehmann suffer from particular vulnerabilities? Or has it been woefully mismanaged?
"You ask me for wine, you pay me."
Sherry-Lehmann's inventory shortfall, cutting across all categories of wine and spirits, appears to be the result of its periodic failure, beginning as early as 2018, to pay its distributors promptly—if at all. New York's SLA requires payments to be made within 30 days of delivery. Failure to pay any supplier promptly requires the retailer to switch to cash on delivery (COD) to all distributors: Cash payment must be made before any wine is delivered until all past-due accounts are cleared. "It's a pretty simple premise," said Victor Schwartz, proprietor of VOS Selections, which once sold wine to Sherry-Lehmann. "You ask me for wine, you pay me."
Another wholesaler told Wine Spectator that he did sell wine to Sherry-Lehmann late last year, but, after several checks bounced he would deliver wine “only after payment was in my bank account for two days.”
"Sherry-Lehmann is meeting all financial obligations with vendors and suppliers on a timely basis, as the company has for over 88 years," a spokesman for the firm told Wine Spectator.
Not true, according to the state liquor authority. SLA spokesperson William Crowley told Wine Spectator that the firm is "on the COD list and is delinquent on payments with numerous wholesalers (and has been since at least December 5). They are currently behind on paying approximately 75 different invoices."
That may be why Sherry-Lehmann is not receiving deliveries from Southern Glazer's and Empire Merchants, New York's largest Champagne distributors. In early December, KKR, a global investment firm located in Hudson Yards, ordered 90 bottles of G.H. Mumm rosé Champagne from Sherry-Lehmann. Four days before Christmas, KKR was informed that the order could not be filled. In a panic, firm executives turned to a shop in Hudson Yards. Mumm's distributor, Southern Glazer's, delivered the 90 bottles of rosé Champagne to that retailer the next day.
Along with supply issues, Sherry-Lehmann faces tax troubles. As of December, it owed $3.2 million to the New York state tax authority in sales and use taxes. Sherry-Lehmann’s spokesman states the company "is actively working to resolve its back taxes issue, which began under our former CEO in the midst of the COVID-19 pandemic. We have been communicating with the N.Y. state tax department since early spring, and have been making monthly payments to reduce the outstanding balance since then. At the same time, the company is meeting all its current N.Y. sales tax payments—and will continue to do so going forward."
Adding to Sherry-Lehmann's woes are numerous complaints on consumer websites, including Yelp and the Better Business Bureau, claiming that the firm failed to deliver wine futures paid for in advance.
Sherry-Lehmann has long offered Bordeaux futures to its customers each spring. The shop's first offering was for the classic 1959 vintage. Buyers hope that by the time the wine is delivered, normally two-and-a-half years after purchase, the futures prices would look like a bargain. Sherry-Lehmann took pride in always delivering the wine as promised.
Two recent lawsuits, filed in the New York Supreme Court, claim the company has broken that promise. In a December 7 complaint, New Yorkers Raymond Fong and Pak H. Chung say that between 2013 and 2019, they bought 826 bottles of first-growth Bordeaux futures for more than $800,000 and never received delivery. In the second action in the same court, filed 12 days later, Florida resident Zachary Segal claims that between 2017 and 2019, he purchased 120 bottles of first-growth futures for $184,452. According to both lawsuits, multiple requests for delivery of the wine were met with "a litany of excuses." Sherry-Lehmann counters that it will "seek full dismissal of these frivolous claims."
A Big Apple wine store
The original Sherry Wine and Spirits, taking its name from the Madison Avenue building in which the shop was first located, opened in 1934. Its founder, Jack Aaron, was a well-known supplier of spirits during Prohibition. After repeal, he opened the store.
Jack's brother, Sam, joined the business the next year. It was Sam who developed the shop's focus on wine. After several moves, the shop settled at 679 Madison Avenue in 1948, a location conveniently situated between the Upper East Side's wealthy residential district and the Midtown office district. The shop's interior, boasting handsome woodwork, was modest yet overflowing with wine and spirits. While a range of top-end bottles were on hand to satisfy the shop's wealthier clientele, an ample selection of bargain wines were also promoted. There was even a large wicker basket heaped with "end-of-bin" bottles. "The hope was," says a former salesperson, "that the intern who came in for a bottle of $5 Beaujolais would someday trade up when they rose to be a renowned surgeon."
In 2007, Sherry-Lehmann chairman Michael Aaron, Jack's son, took advantage of a strong property market and sold the Madison Avenue building to Vornado Realty Trust. Michael then leased the current three-level location at the base of a 21-floor office building at 505 Park Avenue, spending $4.5 million building out the space, including second-floor offices and a meeting area.
The sales floor is richly appointed with cherry wood cabinetry, shelves and arches. Michael and his wife, Christine, personally hung wine-themed curios from the old shop from the ceiling. The rent is reportedly $1.6 million annually. "A wine shop is not a high-margin business," said someone with knowledge about the move. "You're working on practically grocery store margins."
In 2008, one year after the move, Michael, the last of the Aarons to lead Sherry-Lehmann, exited the business at age 68. In 2013, Michael Yurch, president of the company, who started out as a clerk in 1985, also stepped down. Then it was the turn of two men who had started out as seasonal employees at the shop in the late 1990s: Chris Adams, the new CEO, and Shyda Gilmer, who became COO. Former hedge fund executive Kris Green, a close friend of Gilmer, became a partner in the business that same year. All three men received shares in the company. After Adams took a buyout in 2019, Gilmer became CEO.
Gilmer and Green agreed to discuss the firm's issues with Wine Spectator, but the interview was canceled shortly before it was scheduled to take place. The pair's press representative said Gilmer and Green were too busy during the holidays’ sales rush.
"Some people say that the real Sherry-Lehmann died in 2007," said one former employee, thinking back to the Madison Avenue store where wine lovers such as Greta Garbo and Harrison Ford once shopped, and where such wine world eminences as Baron Edmond de Rothschild and Georges Duboeuf dropped by to pay respects. Yet Sherry-Lehmann managed the tricky task of being both relaxed and on its toes, welcoming wine novices and veterans alike. "You come in now and you feel like you’re either in Tiffany's or a museum."
What went wrong?
Sherry-Lehmann's spokesman consistently put the blame for the company's recent struggles on the pandemic. And it's true that COVID drained Midtown of office workers. But it also pushed wine consumers to dine at home, leaving them eager to buy wines at retail they no longer consumed in restaurants. Many wine and spirits stores prospered during the hard times. “Retailers told me that July and August during COVID felt like Christmas season,” says a wholesaler.
As with many other wine retailers, Sherry-Lehmann's sales have been tilting to online purchases. Asked how current sales break down, its spokesman stated, "The pandemic really accelerated the shift from brick and mortar to online sales. Online sales, along with phone, corporate and private client sales, currently account for more than 90 percent of total sales."
But good luck placing those phone orders. Several calls to Sherry-Lehmann in December went unanswered over a wait time of 45 minutes each. And while its website offers a plenitude of top wines, it’s unclear how many are actually in stock. That Mumm rosé that went undelivered to KKR, for example, is still offered on the Sherry-Lehmann website for $683.40 per case.
Almost daily, the shop offers specially priced wine deals to customers on its mailing list. But will those orders be promptly filled? A single bottle of Billecart-Salmon Brut Rosé, ordered in late December for delivery in Manhattan, had yet to arrive eight days later. When customer service was queried, word came back that the wine was not in stock.
Sherry-Lehmann once had five delivery trucks bearing its logo perambulating around the city and out to the Hamptons, and it even offered same-day delivery in Manhattan. It might have taken maximum advantage of what its website calls "contactless delivery" during the pandemic, but those trucks have since been repossessed, replaced now by contracted delivery services and UPS.
For decades, the firm's primary off-site inventory of about one million bottles was stored in a 65,000-square-foot, temperature-controlled warehouse in the Williamsburg section of Brooklyn. Clients who had purchased ageworthy wines from the firm could store their wines at the warehouse for a modest fee. In 2019, with real estate values soaring in Williamsburg, Sherry-Lehmann sold its long-term lease on the warehouse at what a former employee calls a "steep premium." The firm then rented a smaller facility, formerly the Elmhurst Dairy, in Queens. It bailed out of that lease last year. Its much-reduced inventory is now mostly stored in the basement of the shop, where its call center is also located.
In 2016, Sherry-Lehmann briefly leased an additional 12,000-square-foot warehouse in Los Angeles. The plan was to open an adjacent retail store in the El Segundo neighborhood. "In our overall thinking about gaining a competitive advantage in the marketplace, we opted to focus on the strength of the Sherry-Lehmann brand," the firm's former president, Adams, said at the time. That project never got off the ground, however.
According to reports in the New York Post, employees are grumbling that Gilmer and Green have been consuming some of the shop's best inventory at lunches at some of Manhattan's best restaurants and at their vacation rentals. "Normally, when I do business with a client," a wine wholesaler told Wine Spectator, "it happens in their office. With Shyda, it's done in a restaurant over a $400 bottle of wine."
Gilmer’s favorite luncheon haunt was once Le Bilboquet, a chic bistro two blocks from Sherry-Lehmann. “He would bring his own wine and stay for hours, not even paying a corkage fee,” says a source. “But restaurants depend on wine sales. Finally, management told Shyda that he was no longer welcome.”
Gilmer, whose office is on the second floor, is mostly absent from his shop's sales floor. "It's hard to know when he comes and goes," said one salesperson, "because he can enter the building through the office lobby and then access his office through a private door on the second floor."
In fairness to Gilmer, contemporary selling trends were already working against Sherry-Lehmann when he became CEO. Websites unburdened by Park Avenue rent offer online customers sharp pricing and prompt wine delivery. Sherry-Lehmann's 2007 move to Park Avenue, which Michael Aaron believed would give new prestige to the firm after decades of being tucked away on Madison Avenue, may have been not only costly but also not even the ideal location as drinking habits changed. But other wine shops have managed to innovate and draw in new customers, stocking new wines and offering tastings or even opening adjoining restaurants.
Meanwhile, Sherry-Lehmann may be losing more customers than it is gaining, and time is running out. The situation is weighing on Michael Aaron, now living in Florida. “Only a few years ago, the 21 Club, founded by my uncle and mentor, Charlie Berns, was shuttered,” Aaron told Wine Spectator. “Now the possibility of Sherry-Lehmann closing is heartbreaking to me.”
A former partner, surveying the firm's current state, warns: "You can have a really fast horse, but if you beat it too hard, it's going to fall down."
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