Zale Plans 115-Store Shut-Down

A spokeswoman contacted by GlobeSt.com declined to state specifically which stores would be closed, only nothing the closures would begin in 2009 continue into 2010. During the company's February 5 earnings conference call, company CFO Cindy Gordon said the closures would impact Zales and Gordon Jeweler's inline stores, as opposed to kiosks. The move is anticipated to save $34 million in costs.

"These are either money-losing stores, or stores that are so marginal that they do not provide adequate return," she said. She added that the store closures are anticipated to save approximately $34 million in selling, general and administrative expenses.

The financial results for Q2 2009 included a net loss from continuing operations of $23.6 million, revenues at $679 million (compared to $828 million from the year before) and net earnings from continuing operations at $19.1 million versus $72.6 million from the same time last year.

CEO Neal Goldberg said at the conference call he was disappointed with the 2008 holiday revenue, acknowledging that operating results were impacted by the macroeconomic environment. Not helping the situation, he added, was Zale's decision to aggressively promote store-wide discounts during the holiday sales season, which he said decreased gross margins by about 500 basis points. A return to more emotion-based promoting helped steady sales in January and into Valentine's Day, he added.

In the meantime, Zale is continuing to review what Goldberg classified a "very detailed real estate portfolio." "We are aggressively challenging rents as leases renew and are proactively renegotiating the existing leases," he said. "Clearly, the macroeconomic and retail climate we're in right now puts is in a position in which we are going to be very aggressive in looking at our portfolio."