Forte, Leonard Out

After months of disappointing sales and earnings and falling market share, Mary L. Forte, 55, has resigned as president and chief executive officer, and from the board of directors, of Zale Corp., North America’s largest jewelry retailer. Also leaving the company are Paul Leonard, a longtime Zale veteran and former president of Zales Jewelers and, prior to that, Piercing Pagoda; and Charleen Wuellner, senior vice president, corporate services and, before that, president of Gordon’s Jewelers and Zale Outlet.

Zale’s directors appointed Betsy Burton, 54, a business turnaround specialist and board member since 2003, as interim CEO until a successor is named. She became the fourth CEO of Zale, based in Irving, Texas, since 2001. Burton earned her reputation for reviving businesses as CEO of several companies, including Supercuts, PIP Printing & Document Services, and Cosmetic Center. She also sits on the boards of Staples, Aéropostale, and Rent-A-Center.

While Burton temporarily oversees Zale’s operations, the board is conducting an internal and external search for a new CEO to “find the right leadership,” said board chairman Richard C. Marcus.

Meanwhile, John A. Zimmermann has assumed the newly created position of president, Zale North America. The new retail jewelry division includes Zales in the United States and Canada’s Mappins Jewellers and Peoples Jewellers (Canada’s largest), both owned by Zale Corp.

Zimmermann, formerly president of Zale Canada, has the responsibility for merchandising and store operations of Zales, Peoples, and Mappins. He has 25 years of retail experience, the last five with Zale Corp.

No official explanation was given for the surprise change in Zale’s top management. However, observers blamed disappointing financial results for 2005. The Dallas Morning News, Zale’s hometown newspaper, reported Forte was asked to resign by the board “after a shift in strategy failed to translate into higher sales and profit.” Marcus told the paper: “We needed to make adjustments in the leadership qualities required.”

Forte and Leonard had been repositioning Zales to target higher-income consumers and to obtain product directly from overseas suppliers. However, newly installed CEO Burton said, “Upon review of Zales’ business, we concluded that the new strategy negatively impacted our brand positioning, because it deemphasized the value component and key diamond categories of the brand’s assortment.”

Burton noted that Zimmermann has “consistently improved performance at our Canadian brands. We look forward to leveraging John’s talents in addressing the challenges at the Zales brand.”

Zale Corp. saw only a 0.9 percent increase in comparable-store sales for the important 2005 (November and December) holiday season. (The 2004 holiday was also disappointing.) That was far below what it and Wall Street expected, forcing a downsized earnings forecast. In its first quarter, ended Oct. 31, total revenues rose just 1.2 percent and the company saw a net loss of almost $24 million (including costs from closing 30 Bailey Banks & Biddle stores). Comp-store sales fell 1.2 percent.

The corporation in 2005 also lost some market share to Sterling, its major U.S. competitor, and saw its stock price fall.

On Feb. 2, two days after Forte resigned, Zale said preliminary results for its second quarter (ended Jan. 31) saw a 1.4 percent rise in comp-store sales and a 2.7 percent increase in total revenues (excluding store closures).

Forte, who earlier held top posts at QVC and Federated Stores, joined Zale Corp. in 1994 as one of the retail veterans then-chairman Robert J. DiNicola hired to help the company rebuild after it exited Chapter 11 bankruptcy.

Forte began as president of Gordon’s Jewelers, which she repositioned, improving the merchandise mix and boosting sales within two years. In 1998, she became Zale Corp.’s executive vice president and chief administrative officer. She controlled expenses and improved its product quality, merchandise mix, and customer service. In 2002, she was named CEO and later president of Zale Corp., succeeding DiNicola, who had briefly returned as CEO and chairman in 2001.

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