Zale and Signet Lay Out Holiday Plans

Zale and Signet both released financial results, and held conference calls today. While neither company gave specific guidance for the holiday, but seemed hopeful, especially compared to last year at this time.

Some highlights from the Zale conference call:

– Considering most of the industry is rather nervous about Zale, its conference call was pretty upbeat, with the two main buzzwords being “cautiously optimistic.” Even so, it’s safe to say this will be one of the most important Christmases in Zale history.

– One of the things that people complain about is that, for all of CEO Neal Goldberg’s talk about changing Zale, the stores have pretty much remained the same, and depressingly so. Now, Goldberg says his efforts have borne fruit, and he repeatedly urged listeners to “go and see the stores,” noting they now feature differentiated products and “better execution.” Be interested in reader comments on that.

– As far as good news, Goldberg said that bridal and “diamond fashion” have fared the best lately; Canada “seems to be coming back”; and that online revenues were up 17%, with unique visitors up 14%. Which is interesting, in light of the Blue Nile story from yesterday.  Same store sales were down 6.8% for the quarter, better than the 8 percent drop forecast in October.  Goldberg noted the general trend was favorable, but declined to be more specific.

– One intriguing idea they are introducing: Pre-packaged gifts, for products ranging from pearls to diamonds, that will be prominently featured on store counter-tips.

– Zale will be significantly less promotional this holiday – “last year we took our margins down quite a bit and we didn’t see a corresponding rise in sales,” Goldberg said – although there will be some promotional activity.

– Online advertising will have a bigger chunk of its marketing budget this year, as the company considers it a more cost-efficient way to reach consumers, and it also drives web site traffic.

By the way, Zale’s latest commercial, which I saw in a movie theater about two weeks ago, is excellent, and reminiscent of its equally good Mother’s Day ad.

The Signet call:

– As Signet has less problems and is changing fewer things, their call was less interesting. Certainly a 2.4 drop in same store sales is impressive in this economy.  Chairman Terry Burman was, if anything, more tempered in his optimism than Goldberg, noting unemployment is still high.

– I found this comment from Burman intriguing: “While the level of promotional activity in the retail marketplace is again expected to be higher than normal [this holiday], it is anticipated to be less than last year. As price discipline was greater in the jewelry sector than in many other gift giving sectors last year, we believe that jewelry sales were at a competitive disadvantage in Holiday 2008. Which will be less of a factor this year.”

That flies in the face of conventional industry wisdom, which holds that the industry, particularly the chains, are too dependent on price. The implication is that other sectors have been worse.

– Burman thinks last year’s liquidations, such as Friedman’s and Whitehall, had about a two percent impact on its sales, and the presentation noted there will be fewer mass liquidations this year.

–  Responding to a question, he said that about 65% of Sterling’s “mall brands” overlap Zale and Gordon’s.

– Burman talked up the success of Pandora at Jared’s. One analyst noted this seemingly goes against Signet’s stated desire to have differentiated product, but Burman said that differentiated product is just a “tactic,” and that the Pandora demographic corresponds well with Jared’s, and is attracting new customers to Jared stores.

JCK News Director