There were interesting investor presentations from both Zale and Signet over the last week or so, and I have some thoughts on each:

First off, it’s great to hear both these chains talking so much about brands and differentiated products. That is clearly where this industry’s future lies. (Signet noted that 10 years ago, brands made up only 10 percent of its product mix, and mostly in the watch category. But last year, brands accounted for 22 percent of its merchandise.) In many ways, this was what De Beers’ Supplier of Choice strategy tried to bring about. But that just ended up having manufacturers launch their own lines, which they were ill-equipped to do. Having retailers do it makes a lot more sense, as they are already close to the consumer.

Both companies also talked about social media and e-commerce. Certainly, there does seem to be room in the e-commerce sphere for one of the industry’s better-known names to come in and grab a bigger piece of the pie. Zale chief financial officer Matt Appel says the company is “very focused” on social media, and they certainly appear to be ahead of Signet in that regard, though apparently Signet is getting in the game too, with Jared and Kay (finally!) getting Facebook pages in the next few months.

Some highlights from Signet’s “Investor Day,” held Oct. 4:

– First, the company made news by announcing that same-store sales in August and September were up about 10 percent.

– New CEO Mike Barnes once again seemed to smack down reports that Signet was planning to sell its U.K. division, calling it “extremely important to our business model and something that we continue to invest in very strongly.”

– U.S. division president and CEO Mark Light also noted the company was on “track to open 23 stores” this year (fiscal year 2012)—20 Kay stores (nine mall, 11 off-mall), and three Jared stores. It is also planning to exit 35 stores at the end of their leases. Signet is beefing up its expansion plans in 2013, and hopes to open 40 to 50 stores, although 20 to 30 will be closed.

– Senior vice president/general merchandising Ed Hrabak talked about an intriguing new program:

[W]e have been testing this year … personalized jewelry … This program gives our customers the opportunity to clearly take almost any design and make it their own. Our customers can from, the comfort of their own home, lay out thousands of design options, order their selection, have it custom made for them and then delivered to their home or local store within two weeks.

So for a bracelet, the customer will be able to select its length, the colored stone they want, and the metal content. The consumer “will see what [the piece] looks like [and] the pricing in real time,” Hrabak says. This feature will be available online and via in-store terminals.

Signet is also unrolling its Tolkowsky-brand “ideal cut” diamond program, claiming a bit of AGS’ turf. (Tolkowsky.com is a Kay-affiliated site.)

– The digital environment “is a priority area of investment for us,” said senior vice president/marketing George Murray, adding the company has “been steadily adding features” to its Kay and Jared sites. Mobile-friendly versions of the sites will launch in the fall.  

– In response to a question, Barnes said the company is examining “better supply chain advantages going forward.” 

“There may be opportunities for us to go vertical,” he said, “but please don’t read into that that we’re going to go out tomorrow and buy a big diamond mine somewhere. That’s not going to happen. The partnerships we talk about … could be acquisitions or joining ventures even within the supply chain side.”

– The company sees the potential for up to 100 Kay outlet stores. (It currently has 15.) 

Zale executives, speaking on Sept. 27 at the “Telsey Advisory Group Consumer Conference,” acknowledged that the company is still in “turnaround” mode but trending “in the right direction.” And it certainly had some good news to share: 

– The company has seen 10 consecutive months of positive comps. 

– All brands were positive for the third quarter in a row.

– Comparable store sales up 10.4 percent over the past three quarters. (Unlike Sterling, Zale didn’t give any figures beyond what has been publicly announced.)

– The company also wants to grow the “footprint” of Piercing Pagoda.

There was a lot of talk about Zale’s two new jewelry bands: Vera Wang (the “bridal” brand) and Jessica Simpson (the “fashion” brand). I’ve always thought Vera Wang jewelry was a great idea, although when it was attempted before, as “Vera Wang Fine Jewelry,” it was eventually abandoned. That might be because the prior line was pretty upscale, and wasn’t necessarily the right fit for the Vera Wang customer. By contrast, the jewelry Zale is selling is reasonably priced—starting at $649. (And Zale assures me the Vera Wang brand is exclusive. Vera Wang reps didn’t answer my queries about what happened to the prior try.)

There wasn’t much discussion about the company acquiring some less expensive debt to replace its high-interest $150 million loan from Golden Gate, currently its most pressing financial need. But in the past, executives have said that depends on how Christmas goes. (It seems that, each year, the trade says that this might be the most important Christmas in Zale’s history. And here we go again.)

For those who want more info, the Zale presentation can be heard here. The Sterling presentation, here.

 

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