Zale to Close 25 Stores in 2012

Zale plans to close 25 stores in fiscal 2012, company leaders said on an Aug. 31 conference call following the announcement of the company’s fourth quarter financial results.

Those closings will include 20 fine jewelry stores and five kiosks. During the recent quarter, the retailer closed 10 fine jewelry stores and seven kiosks.

CEO Theo Killion said the company has gotten 80 percent of its assortment back to “core” items.

“What that means is that 80 percent [of our assortment] is a collection of merchandise that has predictable margins, has great turns, and that we’ve made room for by getting rid of—over the last year and a half—of unproductive inventory,” he said.

The company also gave more detail on its two latest product launches: Vera Wang and Jessica Simpson.

The Jessica Simpson line will be diamond fashion jewelry with silver, with price points from $79 to roughly $1,000. It will debut in 400 doors in mid-October.

The Vera Wang line, also debuting in 400 doors in mid-October, will feature bridal solitaires plus ladies’ bands, with price points ranging from $650 to $17,000. 

The company noted that it was dealing with soaring materials cost, with CFO Matt Appel estimating that diamond costs were up more than 20 percent, gold has jumped more than 35 percent, and silver has increased more than 120 percent.

The executives also fielded questions about the company’s 2010 loan agreement with Golden Gate Capital, which carries high interest.

Appel said any new financing is “really very dependent on us achieving our expectations, our plans for this coming holiday. And so because so much of our business is concentrated around the holiday season, we are heads down on completing the execution.”

Analysts were generally positive about the results, as they beat the consensus estimates.

“The company has made good progress over the last few quarters and is on track to continue posting higher comps as it raises prices and introduces compelling new brands,” said Rich Patel, research analyst for Bank of America Merrill Lynch, in a research note. “We anticipate higher advertising in F2012 will limit operating income growth but see this as a necessary move to build greater awareness for new brands.”