Zale Selling Piercing Pagoda?

This rumor has come up over the years, but this
report, from Bloomberg
, makes it sound pretty serious:

Zale Corp. is exploring the sale of
its Piercing Pagoda kiosk business to focus on its fine jewelry operations,
according to three people familiar with the matter.

Buyout firms including Apollo
Global Management LLC are looking at the division, according to the people, who
declined to be identified because deliberations are private. 

A couple of points here:

Apollo wanted to
buy Zale
earlier this year—proposing to run it with a team of vets,
including former CEO Robert DiNicola and former Zale divison president Pam
Romano. But Zale instead went with Golden Gate, which retained the current management.
It will be interesting to see if any of the “all-stars” come back if Apollo acquires
Piercing Pagoda.  

– In Zale’s annual
report
 filed just last week, CEO Theo Killion says, “We feel it is important to point out the
businesses that performed well for us this year—Piercing Pagoda and our
internet-based businesses.” The implication is, those are the only businesses that performed
well. Selling Pagoda—and presumably not using
the money for a stock buyback—would give Zale breathing room (which it needs) and ease a lot of the trade’s fears about it. But it may leave it weaker in the long run. It’s interesting how there isn’t talk of selling Zale’s Canadian division, which has also come up over the years. 

– This report only mentions “buyout firms,” which don’t have a great history in the jewelry industry. I always thought Peircing Pagoda would be great fit for
Signet, which wants
to acquire another jewelry chain
, but has “demanding return on
investment criteria.” There aren’t many jewelry chains that could fit that—but “profitable” Piercing Pagoda might.

JCK News Director