Yesterday, struggling jewelry retailer Zale Corp. (NYSE: ZLC) announced the closure of 115 stores in a drastic cost-reduction plan. The company also announced that revenue dropped nearly 18% in the second quarter.The stores designated for closure will lock their doors for good when their leases mature. The closing stores are poor sales performers. In addition, ZLC announced that it will cut its capital spending by 65%, along with 245 jobs already cut this month. Furthermore, the jeweler plans to reduce its debt by roughly $40 million from the end of the second quarter through July (which is the end of ZLC's fiscal year). ZLC noted that the addition of Canadian and Puerto Rican assets give the company flexibility and sufficient liquidity.
All of these announcements are big news, but they accompanied the firm's earnings report. In the second quarter, ZLC posted a net loss of 74 cents per share. A year earlier, ZLC earned $1.34 per share. Quarterly charges included 43 cents per share related to store and goodwill impairments along with a charge of 58 cents per share for valuation reserve on foreign tax credits.
While the company struggles with the recession, the stock is battling to come back to life. Currently, shares of ZLC are working their way through the $1 region, which has acted as resistance since January. If you are looking for a diamond in the rough, I'd steer away from ZLC, as the rough may be way too rough.











Reader Comments (Page 1 of 2)
2-26-2009 @ 8:49PM
Yabba said...
Biggest problem with retailers is they want 100% of the market share and expand at an accelerated rate as if they are gonna get it. Then they end up with to many under performing stores, a mountain of debt and bankruptcy.
2-26-2009 @ 9:00PM
glenn said...
who cares ? ? ? ? ?
2-26-2009 @ 10:41PM
Bob said...
Is Barry Zale still a Blockbuster franchisee?
2-26-2009 @ 11:01PM
OceanBilly said...
When the senior founding members of the Zale family took their heavenly reward, those left behind milked the corporation to death and fought among themselves.
Do you realize how many times over the past 30 or so years Zales has been in trouble? They don't need an economic downturn to fall toward bankruptcy again and again.
2-26-2009 @ 11:13PM
Trinette said...
I'm not surprised. Money is tight for numerous people. Many wear "fakes" in diamonds and you never know it. You can purchase gold and gemstones as well as diamonds from places like Amazon.com and QVC for a lot less money than these brick and mortar stores. I'd buy diamonds from QVC online quicker than I would buy from Zales or any retail store.
2-27-2009 @ 7:56AM
larrypara said...
Why should this come as a surprise to anyone ? You certainly have to know that Zales owns GORDON'S JEWELERS also. Case In Point, when we went to ZALES to buy my new wife her dianmonds, we found exactly what we were searching for but opted to shop around. Not knowing Gordon's was a partner of Zales, we stopped there and yes; they had the EXACT same diamond set( same ct. wt & appraised value ) for several hundreds less $$$$ . GUESS WHAT ?
2-27-2009 @ 9:08AM
ErinMichelle said...
I was hoping this was about Kay Jewelers.
They totally screwed me over with my engagement ring by lying about the quality & finding loop-holes in the warranty. I found a HUGE inclusion hidden behind a prong, & they accused me of cracking it. They refused to replace it but offered to hide it better & wrote 'hide inclusion' on the repair invoice. Once called out, they admitted this is common practice and offered to credit me towards another purchase.
I'll never be able to pass down the ring my husband put on my finger the day he proposed, & I can't even look at it without thinking of crooked jewelers.
2-27-2009 @ 9:35AM
todthompson said...
Our country is soooo screwed. There are all these adds right now about "How to get your $12,000 stimulus check." Yeah, I know it's probably a scam. On the other hand, I do think our current administration is dumb enough to hand over $12,000 checks to bums who contribute nothing to the economy. Like I said, this country is gone...
2-27-2009 @ 9:42AM
colts fan said...
Never again Zales!
I seen this coming for years now.
Whats up with this store and many others is simply this...
You are royalty when buying, you are scum to Zales and many other so called diamond importers when bringing back there junk!
Zales used to stand in front of there lifetime warranty, now it is down to you don't have your warranty papers, there junk is yours to fix!
*** making it right means everything ***
2-27-2009 @ 10:26AM
bbw4muscles said...
Although I love my Zales diamond rings, my everyday ring is an Epihany Platinum-Clad ring from QVC. When held against my "good stuff" no one can tell which is real and which isn't.
2-27-2009 @ 11:41AM
gal3601 said...
I have worked for this company for a few years now and after reading some of the comments on here I must say that the store that I am in is run by professionals and sales people with good ethics. We would never treat any customer the way I have read on here and we have bent over backwards to please them so they would return to us again. There is no problem that we can't solve. I still believe the customer is always right (even when they are not) and I always put myself in their shoes and how I would want to be treated. Pretty soon I am sure I will be out of a job like so many others.
2-27-2009 @ 11:13AM
nosorethroats said...
shop at your neighborhood jeweler. you know what you are paying for at these chains? their advertizing budgets!!!
2-27-2009 @ 11:10AM
Rosemarie Pandiscio said...
I really hate to see any of our businesses go down! Why do you gloat??!! My daughter was employed by Zales for 10 years from high school on. She then went on to management in another corporation. She learned people skills, and believe me, can spot a "fake" at 50'! We have many find pieces from Zales. Shame on your people who really love to "put down" and "gloat" on any retailer going down in this economy.
2-27-2009 @ 11:20AM
anita said...
I worked for the Zale's corp--a lot of their problems are bad regional and store managers. They tell you to lie to the public to get that sale and then won't stand behind the merchandise.
2-27-2009 @ 11:32AM
Tom Lauer said...
Markup is higher at Gordon's and Zales. I worked for Gordon's. Local independent jewelers are your best bet.
2-27-2009 @ 11:58AM
MARY said...
Zales and the other chain jewelry stores opened many, many years ago. They were mainly the "pay something each week" store, so everyone could shop there. Granted, they have a nice selection, but you need to know your merchandise to shop there wisely. QVC, ShopNBC, HSN and Overstock sell more jewelry and at lower prices. As far as purchasing a large and quality diamond, then you need to "know someone" in the business. No wonder so many of us purchase the FAKES now and then.
2-27-2009 @ 12:19PM
fpsych said...
Who needs diamonds? White topaz is just as beautiful, rated nearly as hard on the Moh's stone scale, and costs MUCH less. You can get a 1-carat topaz solitaire ring for $300 or less--and no one knows it's not a diamond unless you tell them. White sapphire is beautiful, too. These gemstones are catching on, and you don't need to go to stores like Zales for gorgeous jewelry. I'm wondering if that's contributing to the downfall of jewelry stores, as well as the economy, and less-than-stellar service.
2-27-2009 @ 2:25PM
ginaknight39573 said...
It really is a shame that so many people are losing their jobs due to the economy and there are all of these comments about how bad a retailer is. I personally shop at Zales and have never had anything but wonderful service from the sales representatives, and all of the jewelry I have bought from there has been top notch. I will be sad to see my local Zales close, but I will be even sadder to see so many people lose their jobs.
2-27-2009 @ 1:00PM
CloudyInSunnyCA said...
My sister manages a Zales store. She's been very happy with sales, and went above and beyond what was expected for Xmas and Valentines day.....
2-27-2009 @ 1:41PM
TN Tarheel said...
I have shopped Zales, Gordon's, Diamond Tower, and other local jewelers. Why bash the company for unscrupulous employees? We have had excellent service, repair, and warranty work with our local Zale's store in Chattanooga, although they have had three different managers in the last 8 years. Remember, be prepared when you buy,shop around, and keep emotions to a minimum! Get to know your jeweler!