Zale is multifaceted. One of North America's largest specialty jewelry retailers, Zale sells diamond, colored stone, and gold jewelry (diamond fashion rings, semi-precious stones, earrings, gold chains); watches; and gift items at some 1,125 stores and 655 kiosks, mostly in malls, throughout the US, Canada, and Puerto Rico. The firm, which targets the value-oriented customer, has a trio of large chains aimed at different jewelry markets: Gordon's Jewelers, flagship chain Zales Jewelers, and Piercing Pagoda. Zale also operates about 130 jewelry outlet stores, runs more than 200 stores in Canada under the Peoples Jewellers and Mappins Jewellers names, sells online, and offers jewelry insurance.
In addition to its retail jewelry stores across North America, Zale offers insurance and reinsurance services through two subsidiaries. Insurance revenues amounted to $10.5 million in fiscal 2012 (ends July).
Zale operates more than 200 stores in nine provinces in Canada under the Peoples the Diamond Store and Mappins Jewellers names. The Canadian operation contributed 17% of Zale's total revenue in fiscal 2012 (ends July).
Sales & Marketing
Zale spent $94.5 million on advertising in fiscal 2012, up from $76.5 million and $75.8 million in 2011 and 2010, respectively. The company advertises nationally.
Zale posted its second consecutive year of rising sales in fiscal 2012 (ends July), suggesting that its turnaround (after a three-year period during which revenue plummeted nearly 25%) may stick. Indeed, sales increased by 7% and 8% in fiscal 2012 and 2011, respectively, vs. the prior years. Nevertheless, the nearly $1.9 billion in sales Zale rang up in 2012 is well off its pre-recession high of $2.4 billion. The increase in 2012 sales was driven by a 7% jump in same-store sales vs. the prior year. Despite the recent rise in sales, the company is still unprofitable. Zale lost more than $27 million in 2012 (compared with a loss of about $112 million in 2011), marking its fourth consecutive year of unprofitability.
The jeweler's second positive sales comparison came after Zale in 2010 launched a multi-year strategy designed to stabilize the business and return it to profitability. Elements of the plan include rebuilding the core diamond assortment. To that end, in fiscal 2011 the retailer brought back its "The Diamond Store" campaign for Zales and Peoples Jewellers and entered into exclusive partnerships with bridal maven Vera Want and Jessica Simpson to develop exclusive wedding and diamond fashion collections. The back-to-back sales increases suggest Zale may be gaining some traction with customers. Given the improvement in the economy, Zale is forecasting continued sales gains and a return to profitability in fiscal 2013.
In response to its declining fortunes, Zale has closed more than 350 stores in recent years and sold its 70-store Bailey Banks & Biddle Fine Jewelry division. Zale repositioned its remaining jewelry chains to focus on moderately priced merchandise. Kiosk jewelry, operating under the Piercing Pagoda, Plumb Gold, and Silver and Gold Connection banners, offers an extensive collection of entry-level priced merchandise (as well as on-site ear-piercing). Sales of kiosk jewelry accounted for 13% of the company's total sales in fiscal 2012 (up from 11% in 2007).
In a bid to raise cash to fund its turnaround, Zale hired the investment bank Peter J. Solomon to help it find new investors. Private-equity firm Golden Gate Capital purchased about 20% of struggling Zale in May 2010 and lent the firm $150 million, for which it received two seats on the company's board of directors.
Z Investment Holdings, an affiliate of Golden Gate Capital, owns more than 25% of Zale's shares. It is the company's largest shareholder ahead of Breeden Capital Management, which owns about 15% of Zale.