National Jeweler Network

Financial Reporting

Zale records 12th quarter of positive comps

By Michelle Graff

November 26, 2013

Dallas--Same-store sales grew in Zale Corp.’s fiscal first quarter, driven by strong sales at the company’s Zales- and Peoples-branded stores and of both bridal and core fashion jewelry.

In the quarter, ended Oct. 31, same-store sales increased 4 percent (5 percent at constant exchange rates) year-over-year. Total sales grew 1 percent from $357.5 million to $362.6 million.

The company’s U.S. fine jewelry brands, Zales Jewelers, Zales Outlet and Gordon’s Jewelers, saw same-store sales increase 6 percent while comps at the company’s Canadian stores, Peoples Jewellers and Mappins Jewellers, were up 2 percent (7 percent at constant exchange rates).

Same-store sales for the Piercing Pagoda declined 2 percent, impacted by a drop-off in mall traffic (all same-store sales figures include associated e-commerce businesses).

Net loss was down slightly, from $28.3 million in the first quarter of fiscal 2013 to $27.3 million in the first quarter of fiscal 2014.

Gross margin was essentially flat at 53.4 percent, compared with 52.4 percent in the prior-year period.

Like Sterling and Tiffany, Zale reported that color was a strong seller during the quarter. During the company’s earnings call Tuesday evening, CEO Theo Killion said the retailer’s Candy Colored Diamonds and Gemstones collection has “resonated with our guests” and that the company is adding new hues for the holiday season.

In addition, Killion mentioned the Celebration Fire diamond, the stone that sparked a lawsuit with rival Sterling Jewelers Inc.

Sterling sued Zale in November 2012 claiming that the retailer’s statement that the Celebration Fire was “the most brilliant in the world” constituted false advertising. The two chains settled the lawsuit in September.

Though the terms of the settlement were never disclosed, Killion referenced the Celebration Fire only as having “extraordinary luminance” during the call, and the diamond’s superlative brilliance is not mentioned on the company’s website page for the Celebration Fire.

As the company’s launches it holiday marketing campaign, Killion said it is focusing on marketing to the millennial generation, nabbing musical acts such as The Black Keys, Various Cruelties, Lord Huron and Florence and the Machine to provide the soundtrack for its commercials. These are “artists you may never have heard of” but the millennials have, he told analysts on the call.

“The response to the music and the spots has been terrific,” Killion said.

He also mentioned Zale’s social media efforts, which include Facebook, Instagram, YouTube and Twitter. “We believe the guest is playing the game differently so we have to provide them with new opportunities to interact with our brand,” he said.

Zale closed seven stores and five kiosks in the first quarter. Five of the seven stores closed were regional brand stores in malls where there already is a successful Peoples or Zales store, the company said, and it expects closures of regional brand and Piercing Pagoda kiosks to continue.