Zale Replaces CEO: Goldberg New Head

By Rob Bates -- JCK Online, 2/1/2008 2:00:00 AM

Neal Goldberg, former president of the Children's Place, has been named president and chief executive officer of Zale Corp., replacing Mary Elizabeth “Betsy” Burton [pictured above], who is stepping down from her management and board positions. He is Zale's third CEO in two years, and the second in a row without retail jewelry experience.

Burton, a turnaround specialist and director of Zale since August 2003, became CEO of the company in February 2006, when she replaced Mary Forte. She will continue to advise the company pursuant to a two-year consulting agreement.

Zale Corp.'s director of investor relations, David Sternblitz, said the decision wasn't a surprise. “It was pretty clear, at least internally, when Betsy took over, that her objective was to position the company for future success and to provide an orderly transition to a long-term leader,” he said. “Betsy and the board have been talking about a succession plan for some time. Her family is on the West Coast, and she would commute home once a month. Obviously this wasn't going to be something long term.”

The move again raises questions about stability at Zale, which in recent months also has replaced its chairman and fired the head of its flagship Zale division.

But Sternblitz said, “I think the board is very interested in putting in a leader who could potentially be here for 10 years. [Neal Goldberg] is 48 years old and has over 25 years of experience. But he is still young enough that there is that hunger to prove something.”

Goldberg, who will join the company's board, has 27 years of experience in the retail industry including senior roles at Macy's, Victoria's Secret, and Gap.

In a conference call Zale's recently installed chairman, John E. Lowe Jr., called Goldberg a “strong merchant and a skilled operator, recognized as a team player and a team builder.”

Burton's short tenure was noteworthy for the sale of upscale division Bailey Banks & Biddle to rival Finlay. However, sales had not increased significantly, and Burton had warned of an anemic holiday season. For the quarter ending Oct. 31, 2007, it reported a net loss of $28.4 million. Comparable-store sales decreased 0.2 percent.

News of the CEO shift caused the company's stock to plunge to below $15. The year before it had traded in the $30 range.

The company also is seeing its stock increasingly being bought by hedge funds, led by Breeden Capital Management, known for forcing changes at companies like H&R Block and Applebee's. After the move, Breeden nearly doubled its stake in the company, from 7.7 percent to 13.3 percent and then to 15.8 percent. The fund, led by Richard Breeden, a former director of the Securities and Exchange Commission, is now Zale's largest shareholder.

He and an associate, James Cotter, recently won seats on the Zale board.