National Jeweler Network

Financial Reporting

Zale holiday comps up 2 percent

By Michelle Graff

January 10, 2014

Dallas--Calling its holiday season “solid” in a challenging retail environmental, Zale Corp. recorded a 2 percent year-over-year increase in same-store sales in November and December, the retailer reported Friday.

While same-store sales were up, the closure of 91 stores during the course of the year and a decline in the Canadian exchange rate resulted in a 2 percent drop in total sales for the two-month period, $556 million compared with $567 million in November-December 2012.

Zale’s U.S. stores outperformed it Canadian locations. The company’s U.S. fine jewelry brands, Zales Jewelers, Zales Outlet and Gordon’s Jewelers, posted a same-store sales increase of 4 percent while comps at its Canadian stores, Peoples and Mappins Jewellers, were up only 0.5 percent at constant exchange rates.

Comp sales at the Piercing Pagoda fell 5 percent, impacted by the drop in foot traffic at malls nationwide.

Online sales are included in the company’s same-store sales calculation and was a “big part” of the retailer’s positive performance in Canada and the United States, executives said.

During a conference call held Friday morning, Zale CEO Theo Killion said he was “pleased” with the 2 percent comp increase given the “unusually challenging retail environment”--the shorter holiday season, bad weather and slower foot traffic.

Strength in the bridal drove the increase, particularly the exclusive brands, such as the Vera Wang Love collection.

Killion said the retailer is focusing on its proprietary brands going forward, expanding SKUs in Love and for its Celebration Fire diamonds. In addition, the retailer plans to double the amount of stores carrying its new heart-shaped-centric collection, The Heart Within, by Valentine’s Day.
Like competitor Sterling Jewelers Inc., Zale noted that this holiday season was highly promotional, with retailers slashing prices in order to compete for the fewer customers out there shopping.

Despite this “backdrop of intense promotional activity,” Killion said the retailer actually ran fewer promotions in November and December. As a result, the company forecasts gross margin for the second quarter ended Jan. 31 to be about 52.6 percent, higher than the prior-year period.

Zale plans to release its full second quarter results in February.