Some thoughts on Zale Corp., which
has seen a lot of stock action (both positive and negative) in the last week:
– On Jan. 11, the company will announce its holiday sales.
Most hope and expect that same-store numbers will be up – if only because 1)
Zale is coming off of two lousy holiday seasons in a row, which saw 19.6%
declines, 2) this was a good year for jewelry, and rumor has it Zale’s
competitors did well, 3) Zale advertised pretty heavily, and 4) most think the
merchandising strategy is better than it was last year. If sales don’t show some
gains given all those factors, people will definitely get spooked.
And yet even with an increase, analyst Jeffrey Stein of
Soleil wrote in a widely disseminated report this week that Zale “is at least two years away for profitability.”
– If that’s true, after two years of losses, Zale will need
to do something to get its finances healthy again. Most of the speculation stems from the Bloomberg report
that it might sell the Piercing Pagoda chain, which its CEO recently singled
out as one of the company’s best divisions.
Apollo Capital Management is an interesting suitor for Pagoda because
it tried to purchase the entire Zale chain last year. It also is associated
with former Zale chairman Robert DiNicola, who oversaw
Zale’s purchase of Pagoda in 2000. In addition, Apollo owns
the costume jewelry retailer Claire’s.
– Trade chatter is that vendors are getting paid and still
supportive. And the fact that some Indian companies can apparently get
insurance has kept them selling the company.