– First off, the company seems to be switching direction dramatically from its prior leadership. Whereas former CEO Neal Goldberg didn’t have much nice to say about other jewelry stores, including Sterling, executives today mentioned how its staff is spending time in our “direct competitor’s stores to understand and analyze their assortments.”
Interim CEO Theo Killion noted that the company will not sell “new untested goods but [go] back into the price points that have been sold by us in the past.” He added that the company will only stock “goods that sell, or that we’ve tested and retested. … What I’m describing is the kind of work that can be done in a business that turns one time in a year. It’s not sexy, it’s not in the moment. The jewelry business at its core is a simple business and if you execute the fundamentals well, it can be very profitable.”
This emphasis on “testing” and “fundamentals” rather than “newness” again seems a criticism of past strategies.
- Regarding the ongoing questions about Zale’s liquidity, CFO Matthew Appel noted that it has enlisted the Peter J. Solomon company to raise capital, and said: “We expect within two or three months we will complete the exercise … There have been countless articles and blogs that have speculated about our financial condition and our future … We have great confidence in our ability to obtain the financing that we are seeking.” (You can read more about one of its options here.)
Asked if divisions will be sold, Appel responded: “We will not comment on any aspect of the capital raising … We don’t currently have any plans to sell any parts of our business. Let me just be clear about that.”
Regarding vendors, Appel said: “We have paid our vendors, and I would like to thank them for their patience. Shipments are ongoing, orders have been placed, terms have been expanded and we are very comfortable with the way that the trade is interacting with us.” No mention was made of the widely cited Wall Street Journal report that Zale had asked vendors to buy back their inventory.
- Speaking of the Journal, which has done a lot of great work on this story, management seemingly denied its report that it had canceled most of its marketing for Valentine’s Day and Mother’s Day.
“We did market at Valentine’s Day,” Appel said. “It was a little less than we did a year ago, but we had three days of advertising … As we think about planning Mother’s Day, we will have a full arsenal at our disposal.” If that’s so, it’s a little strange why the company didn’t deny that to the Journal three weeks ago. That is what company spokespeople are there for.
One thing that will continue from the Goldberg era: A shift of resources to Internet advertising, rather than television. “We don’t think TV bombardment is the path to success right now,” Appel said.
This is a bit of a contradiction, because if Zale is studying Sterling, Sterling is known for bombarding TV with ads, as anyone who watches around Christmastime can attest. But it is also very expensive.
– The company closed 24 stores and four kiosks in the second quarter, and opened a new store in Canada. No significant store closures are planned in the next year, Appel said.
– As far what is working in the company, management singled out Piercing Pagoda, its Canadian stores, and the e-commerce division.
– Despite posting an unexpected profit – the company’s first in a while – its second quarter results are “unacceptable, and speak for themselves,” Killion said. But he stressed: “We know there is a fix for this business.”
Anyone with more thoughts or information about Zale, feel free to comment or contact me at firstname.lastname@example.org.
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