The Dallas Morning News reports that Zales, the largest United States jewelry chain's stock price has fallen more than 12 percent since Thanksgiving, as Wall Street expresses concerns about the Irving, TX-based company's shrinking market share.
The company has lowered sales and profit expectations in recent months and has admitted that it has lost market share to Kay Jewelers.
Since reaching its split-adjusted high of $34.50 in July, Zale stock has fallen more than 25 percent, closing December 27 at $25.28, down 47-cents.
After disappointing results for Christmas 2004, the company shuffled management at Zales Jewelers, which makes up 45 percent of Zale Corp.'s sales. But a year later, the chain is still stumbling.
In a shift in direction, Zales is getting away from its "price-driven strategy" and emphasizing "a more style and quality image," said David Sternblitz, Zale vice president and treasurer.
The chain is buying basic jewelry directly from overseas sources, bypassing traditional wholesalers in the United States. And it has hedged against rising gold prices in recent months, he said December 23.
Zales is advertising for the first time in The New York Times Sunday magazine and has ditched its longtime television commercials for image ads. It's also using more direct mail and fewer newspaper inserts, Mr. Sternbiltz said.
The many moving parts have put Wall Street on guard. In November, J.P. Morgan and Goldman Sachs downgraded the stock.
Analysts say major competitor Kay Jewelers and department stores such as J.C. Penney Co., and Federated Department Stores Inc., which operates Macy's and Bloomingdale's, are luring away Zales' traditional customers.
In a note issued last week, Goldman downgraded Zale stock because of "extensive internal merchandising and marketing repositionings during the critical holiday season, which accounts for 100 percent of earnings."
Penney's jewelry offerings were "more contemporary and fashion-forward," the report said. "Zales continues to bleed market share to Kay, as demonstrated by the annual same-store sales trends since 2003."
Kay Jewelers and off-mall chain Jared are both owned by London-based Signet Group and operated by its subsidiary, Sterling Jewelers Inc., based in Akron, Ohio.
"We've experienced an erosion in market share to our next largest competitor over the past three years, and that's why we're repositioning Zales," Sternblitz said.
"We have been visiting Zales stores across malls over the past few weeks in search of positive evidence that management has been executing its brand repositioning efforts well. We have come up empty," wrote Goldman Sachs analyst Adrianne Shapira.
The week before Christmas, Zales stores put up "Lowest Prices of the Season" banners in an attempt to meet sales targets.
Sternblitz said that the company estimates comparable store sales to increase 2 percent to 3 percent. It plans to announce combined November-December results on January 5, when chain stores are scheduled to report December sales.
In addition to its flagship Zales Jewelers division, Zale owns Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers and other chains.
Zale expects to report fiscal second-quarter earnings of $2.05 to $2.08 a share, excluding a one-time gain.
Posted by Barry Gutwein on January 4, 2006 9:31 PM in Jewelry Stores Comments (2)
The company has lowered sales and profit expectations in recent months and has admitted that it has lost market share to Kay Jewelers.
Since reaching its split-adjusted high of $34.50 in July, Zale stock has fallen more than 25 percent, closing December 27 at $25.28, down 47-cents.
After disappointing results for Christmas 2004, the company shuffled management at Zales Jewelers, which makes up 45 percent of Zale Corp.'s sales. But a year later, the chain is still stumbling.
In a shift in direction, Zales is getting away from its "price-driven strategy" and emphasizing "a more style and quality image," said David Sternblitz, Zale vice president and treasurer.
The chain is buying basic jewelry directly from overseas sources, bypassing traditional wholesalers in the United States. And it has hedged against rising gold prices in recent months, he said December 23.
Zales is advertising for the first time in The New York Times Sunday magazine and has ditched its longtime television commercials for image ads. It's also using more direct mail and fewer newspaper inserts, Mr. Sternbiltz said.
The many moving parts have put Wall Street on guard. In November, J.P. Morgan and Goldman Sachs downgraded the stock.
Analysts say major competitor Kay Jewelers and department stores such as J.C. Penney Co., and Federated Department Stores Inc., which operates Macy's and Bloomingdale's, are luring away Zales' traditional customers.
In a note issued last week, Goldman downgraded Zale stock because of "extensive internal merchandising and marketing repositionings during the critical holiday season, which accounts for 100 percent of earnings."
Penney's jewelry offerings were "more contemporary and fashion-forward," the report said. "Zales continues to bleed market share to Kay, as demonstrated by the annual same-store sales trends since 2003."
Kay Jewelers and off-mall chain Jared are both owned by London-based Signet Group and operated by its subsidiary, Sterling Jewelers Inc., based in Akron, Ohio.
"We've experienced an erosion in market share to our next largest competitor over the past three years, and that's why we're repositioning Zales," Sternblitz said.
"We have been visiting Zales stores across malls over the past few weeks in search of positive evidence that management has been executing its brand repositioning efforts well. We have come up empty," wrote Goldman Sachs analyst Adrianne Shapira.
The week before Christmas, Zales stores put up "Lowest Prices of the Season" banners in an attempt to meet sales targets.
Sternblitz said that the company estimates comparable store sales to increase 2 percent to 3 percent. It plans to announce combined November-December results on January 5, when chain stores are scheduled to report December sales.
In addition to its flagship Zales Jewelers division, Zale owns Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers and other chains.
Zale expects to report fiscal second-quarter earnings of $2.05 to $2.08 a share, excluding a one-time gain.
Posted by Barry Gutwein on January 4, 2006 9:31 PM in Jewelry Stores Comments (2)
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