Zale Sees 2 Percent Jump in Holiday Comps

Zale Corp. announced a 2 percent jump in comp sales this holiday, with good growth from its Zales stores, but a drop in sales at Piercing Pagoda and Gordon’s. 

Overall, revenues dropped to $556 million, compared to $567 million the prior year, due to a decrease in 91 stores and a decline in the Canadian exchange rates. 

Comps in Zale’s branded stores were up 4.4 percent, but comps at its smaller Gordon’s chain dropped 4.7 percent. Same-store sales at Piercing Pagoda, its kiosk business, dropped 5.1 percent. 

“Our Piercing Pagoda sales, being mall-based, are sensitive to mall traffic trends, which were sharply down compared to last year,” said chief financial officer Thomas Haubenstricker in a conference call following the release of the results. However, he did note that Pagoda’s gross margins improved.

Sales at its Canadian brands—Peoples Jewellers and Mappins Jewellers—were more mixed. Comps at Peoples dropped 4.5 percent in dollars, but rose 2 percent in constant exchange rates. However, sales at Mappins fell 12.2 percent in dollars and 6.2 percent in constant exchange rates. 

CEO Theo Killion called this an “unusually challenging holiday period, one with fewer selling days, slower traffic, and unfavorable weather.” But he said the company had fewer promotions this holiday.

“In the U.S., we eliminated promotions,” he said. “We had confidence the proprietary products would carry the day for us, which they did. In years past, we have done some of those promotional activities, which hurts us in the long run. So we are going to stay true to what we are doing, which is promoting those proprietary brands.”

Killion said its candy-color gemstone collection “did well” this holiday, and it will be expanding its the Heart Within, Vera Wang LOVE, and Celebration Diamond collections. 

The company hopes to grow collections to 13 percent of fine jewelry revenue, it said.

The underperformance at Gordon’s and Mappins wasn’t a surprise, executives said, given the environment and the fact that that Zale’s and Peoples receive a majority of the advertising support.

“We feel the cornerstone for growth will be in our Zale’s and People’s brands,” he said.

Chief administrative officer Matthew W. Appel said Gordon’s and Mappins are “disproportionately represented in store closures,” and many of them will be converted to the Zale’s and Peoples nameplates. 

But he added there are some good stores in those brands, and he said they are “not closing” them.

JCK News Director