Funny, it's not surprising to me. Big companies with management disarray and languishing stock prices--but widely recognized brands--are usually just the type to attract corporate raiders. If they manage to get control, you can expect some significant changes. A merger doesn't strike me as likely (Zale is big enough, maybe too big) but a major repositioning in the market could be in order.

I also don't think that a merger would go through with Signet/Sterling. Zales is looking like too weak of a brand to stand-alone profitably, even with Sterling's expertise, and it's too large to be suddenly rebranded JB Robinson. Gordon's might work though, if Zales would stop diverting their resources. I think it's more likely that Sterling would buy the leases to several Zales and Gordon's stores in prime locations. I'd be interested to know what Homer thinks a major repositioning would look like for Zale. Maybe going downscale for Zales to compete with Friedman's and continuing to move Gordon's slightly more upscale to compete with the likes of Helzberg?

I don't know much further downmarket Zales could go, and they're already getting killed by Wal-Mart on the lowest end. It's an upmarket move I wouldn't be surprised by. For all their troubles, they remain one of the most recognizable brand names among consumers.

Hi guys. Thanks for the discussion. Going somewhat upmarket was Mary Forte's plan; much of it made sense, even if it was too ambitious and tried to do too much at once. But Burton moved away from that and I wouldn't be surprised if her successor reverses course and again goes upscale. I agree the name has considerable potency on a consumer level and the right team could revive it. Anyway, back to my post, I agree Zale is a natural for someone like Breeden to invest in. But its short-term prospects are dismal, and if things continue as they are there is scant chance for Breeden to profit on his investment for a long time, even with a repositioning. So the question is: Will he force some dramatic change to make his investment worth it? (One thing I should note is that while he only owns 13.3% of the company, there are a bunch of hedge funds who have also invested and are presumably following his lead.) There has already been a change in leadership. And I agree a merger would be terrible. But that doesn't mean it won't happen. There were, apparently, pretty serious talks about it, and, based on the conference calls I've heard, investors seem to want it. And what is good for investors is not always good for a company long-term.

Mary Forte seemed to be the savior of Gordon's by shifting it away from being downscale, but then Zales entire "Be Brilliant" strategy blew up on her watch so she was sadly booted. I think it depends on what we're looking at when we talk about upscale. I seriously doubt that Zale customers would want to see much of the Bailey's merchandise. And we all know how the move to silver and gold fashion sank Zales' ship. However, expanding the quality and carat range of diamond solitaire product, expanding bridal styles, and introducing more mid-tier Swiss watches (Movado, Wittnauer, Accutron, Tissot, etc.) have all helped Zale in the past, especially when they kept the prices from going crazy. Sadly, I see new Counter-Top fixtures and lab-created white sapphires at Zales constantly. Zale has to walk that careful line of keeping track of what the competition does, but also treading their own path with new innovations. I surely hope that investors aren't buying up Zale because they see it sinking fast and smell that sell-out coming. But what other tricks can Zale pull?

ZALES has a great name and continues to provide trust to the consumer. However the younger and buying generation is motivated by the internet. ZALES has a poor presence on the internet. They should add more youthful brand names of watches to bring a younger buyer. The BULOVA ,SEIKO, CITIZEN, MOVADO are old names. Fashion brands like GUCCI, FENDI, DOLCE GABANNA and GUESS would attract young buyers. They should purchase a major internet watch store to provide a great selection of fashion names. ZALES is not dead, it is old and needs a face lift.