Is Zale Still Fixable?

This article in the Wall Street Journal on Wednesday night, claiming that Zale was trying to get vendors to repurchase their inventory, as well as other people’s, was described by one Zale vet as “one of the most embarrassing things I’ve ever seen.” As a wise person said, Zale needs to be worried about making sales to customers, not their own vendors. And while Zale declined comment, my trade sources said much of it was true.

The article basically said what I think we all realize: Zale is in trouble. The question is: Is it still possible to turn things around?

Obviously Zale is going to need a fresh infusion of cash, which is why the detail that Zale may retain investment bank Peter J. Solomon is potentially significant.

But while Zale may be able to replenish its coffers in the short-term—and that is not for certain – that will just be a band-aid unless it re-establishes itself as a retail force.  Another nugget in the article – that it has canceled most of its Valentine’s Day and Mother’s Day advertising – does not bode well. By contrast, Sterling has been all over the airwaves these past weeks, as it was at Christmas. (Zale, again, wasn’t, having shifted most of its ads to online.)

Right now the company has a lot to do. It is switching its strategy to “back to basics” – turning its back on much of what it’s done for the last two years. At the same time it needs to rebuild its executive ranks after decimating them in January.

Gil Hollander, the extremely well-regarded chief sourcing officer, is now also in a merchandising role, where he is less experienced. Also left is marketing director Richard Lennox, another smart guy who is still a newcomer to the world of retail.  The CFO is still there, but he seems very close to the board. The crucial role of “chief stores officer” is now unfilled.

Zale also needs to reassure its vendors, before they all start abandoning ship. Trying to get them to buy other people’s stock is not a good way to start.

And, of course, Zale needs to be steered by people who really care about the company – not just their own interests.

There is almost no positive news one can take away from the current situation, although there are some who think Zale is still fixable. It remains one of the most powerful brand names in the industry. There is just a lot to do, and not a lot of time.

JCK News Director