It was a pretty mixed bag on today’s Zale conference call – the company had a
narrower loss, even though same store sales were down 2.2%. But more
ominously, Mother’s Day sales were “soft” (though they maintained
margins.) The company clearly has a lot of issues, and it is going to be
a long, hard road back to where it needs to be, assuming it gets there.
Still, management announced they had “made progress” in executing their
turnaround plan (the latest in a series), and their prescriptions for the
business seem generally sensible. No one’s trying to reinvent jewelry
retailing, or talked about patterning their business after Sterling’s. (Instead, they were looking at
how Zale performed historically. Which seems wiser.)
To me, the biggest surprise was when interim CEO Theo Killion announced that
Piercing Pagoda had launched a website, pagoda.com.
Considering both Pagoda and e-commerce are among the best parts of their
business, it’s amazing that wasn’t done already.
Here are some highlights (full transcript here):
– Company still talking to Citibank about credit cards; “nothing definitive”
to report at this time. “Rest assured that in no situation will we be
with our proprietary credit for our US customers during the upcoming
holiday season,” said Matt Appell, CFO.
– Also Killion: “Over the four-day Valentine’s Day, President’s Day
weekend, not only were we challenged from a merchandise standpoint, we also had
significantly less media than a year ago. In the Zales brand alone, we
eliminated radio, two direct mail pieces, a catalog, and had 11 fewer days of
television advertising. We were, however, able to deliver a 5.5% comp
performance over the four-day period, which is attributed to the outstanding
effort of our sales teams. They were able to sell what they had, not
necessarily what they wanted or what they needed. We also made the decision
during the third quarter to reduce our promotional activity and walk away from
some events that drove volume.”
– The core of the new strategy is “reinstating the core assortment,” which
is 85% of the business – particularly reinstating entry level price points to
its bridal assortment.
– Silver is doing extremely well.
– The company is liquidating unproductive “non-core product” CPUs. I would
guess this is a lot of the product from the Goldberg era (which also had a
massive clearance of non-favored merchandise.)
– Zale is looking into restoring “individual brand identity” of its stores,
although not the “siloed organizational structure” of the past. This seems to
be one of those things that cycle back and forth. But, again, the reasoning behind
this seemed strong.
– No news on advertising.
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