As the year draws to a close, I’d like to look how some of our industry’s leading companies fared this year. First up: Zale Corp.

Now, when assessing Zale, a lot depends on the upcoming Christmas season. This holiday may be one of the company’s most important ever. (Yes, I know, that’s now said virtually every year.)

If current trends continue, and I don’t see why they shouldn’t, Zale should score a decent comp store gain this holiday. The company has put a lot of effort into this season, with CEO Theo Killion stressing employee training. (It seems that all Zale CEOs realize the importance of that sooner or later.) Perhaps most interesting, it’s gambling with another oddball celebrity endorsement: It’s gotten Shaquille O’Neal to endorse a men’s jewelry line. (Jessica Simpson didn’t work last year.) Now, if anyone can interest men in jewelry, O’Neal can. But that assumes there’s a market there, and that’s not clear. But you have to give Zale credit for out-of-the-box thinking.

Still, the consensus is that Zale is back in the game. Mark Light, president of Sterling, even said recently his once-crippled rival “seems to be gaining momentum.” Sterling’s recent lawsuit against Zale may even be seen as the ultimate back-handed compliment. You don’t sue people who aren’t on your radar. 

(About that lawsuit: I think it’s a little silly for Sterling to contend that Zale is being misleading by calling its Celebration Fire “the world’s most brilliant diamond,” because it didn’t literally compare it to every diamond in the world. By that standard, Sterling is being misleading, since not every kiss begins with Kay.)

But back to Zale. When Killion took over in 2010, working with Matt Appel, many in the trade didn’t express much confidence. After all, neither had much retail experience. But you can’t argue with their results—eight consecutive quarters of positive comps, in a tough economy. Now, the company has to start turing a profit. Executives have said they hope to do that next year.

All in all, Zale is probably doing about as well as a company that owes a lot of money to a private equity firm can do. But it’s still a company that owes a lot of money to a private equity firm. And even with its recent refinancing, it’s paying Golden Gate Capital 11 percent interest. The so-so state of its balance sheet means Zale does not have near the resources that Sterling does. So it remains very much in turnaround mode. 

One thing I’ve never understood: Why doesn’t the company sell one of its divisions? Both Piercing Pagoda and the Canada division are pretty salable; Pagoda even once had a wiling buyer, Apollo. (And buyers aren’t easy to find these days.)

Golden Gate has been very patient with Zale, and that’s to be commended. But at some point, it may start looking for an exit strategy, and the corporate structure of the company may change yet again. So, even with all that’s been accomplished, Zale still has quite a few hurdles to clear. But you have to be impressed by how many it has already overcome. 

Rob Bates

JCK News Director