QUOTE AND NEWS
Wall Street Journal  Nov 25  Comment 
Signet Jewelers Ltd. raised its earnings guidance as the company’s sales for the most recent quarter were again elevated by its Zale Corp. acquisition earlier this year.
New York Times  Oct 24  Comment 
The activities of Zale H. Thompson, who was shot and killed by the police in Queens after he struck two officers on Thursday, are under investigation.
TheStreet.com  Aug 28  Comment 
NEW YORK (TheStreet) -- Signet Jewelers surged Thursday on volume that was more than five times the stock's three-month average after the company reported strong core operations and increased its cost saving and revenue targets for its...
Wall Street Journal  Aug 28  Comment 
Wall Street Journal  Jul 1  Comment 
Signet Jewelers Ltd. said Theo Killion, the chief executive of its Zale division, will resign at the end of the month. Signet Chief Financial Officer Ronald Ristau also resigned on Tuesday.
Motley Fool  Jun 24  Comment 
The jewelry industry just got a little smaller; here's the best way to invest.
Reuters  May 31  Comment 
Three funds that voted against or did not vote for Zale Corp's merger with rival Signet Jewelers Ltd plan to seek an independent valuation of their shares from a judge, the Wall...
Wall Street Journal  May 30  Comment 
Three funds that voted against or didn't vote in Zale's sale to rival ring-retailer Signet Jewelers plan to seek an independent valuation of their shares from a judge, according to people familiar with the matter, taking advantage of an...
Wall Street Journal  May 29  Comment 
Signet Jewelers Ltd. said it completed its $1.46 billion acquisition of Zale Corp. after the deal won approval by a majority of Zale's shareholders on Thursday.
StreetInsider.com  May 29  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Signet+Jewelers+%28SIG%29+Completes+%2421Share+Purchase+of+Zale/9535043.html for the full story.
Wall Street Journal  May 27  Comment 
Proxy advisers Glass Lewis and Egan-Jones Proxy Services are taking opposing sides ahead of a shareholder vote on jewelry retailer Zale's pending sale to larger rival Signet Jewelers.




 


Zale Corporation (NYSE: ZLC) is a mid-tier retailer of fine jewelry, operating approximately 1,900 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.

Zales has a tenuous market position because it lacks the scale of mass discount retailers like Wal-Mart, and its reputation as a mid-tier jewelry seller makes it difficult for it to compete for wealthier clients that frequent high end stores like Tiffany. The company's focus on middle income and young adult customers also makes it more vulnerable to economic downturns than its higher end competitors, because these two groups tend to reduce their spending more drastically than higher income customers.


Trends and Forces

Zales is sandwiched between high end and discount retailers

Given the number of players and the commodity-like nature of the product being sold, the retail jewelry business is extremely competitive and fragmented. ZLC faces increased competition from the growth of mass merchant retailers like Wal-Mart, the largest jewelry retailer in the combined U.S. and Canadian markets[1]. Discount retailers like Wal-Mart have aggressively pursued and captured a large portion of the price-sensitive consumer jewelry market. At the upper end, Zales must compete with stores like Tiffany, a company who has more successfully associated its brand with high-end jewelry items. Moreover, Zales must also deal with increasing competition from internet vendors like Blue Nile, which ranks just behind Tiffany and ZLC in diamond ring sales after just a decade in the business. Internet retailers are often able to sell the same product for much lower prices thanks to lower overall costs.

Fluctuations in the prices of diamonds and other commodities will impact Zales’s business

The supply and prices of diamonds in the world markets are significantly influenced by a single organization, the Diamond Trading Company[2]. This company controls the marketing of a considerable bulk of the world’s supply of diamonds. It also sells rough diamonds to diamond cutters at prices determined solely at its own discretion.

Zales is more vulnerable to economic downturns than its high end competitors

Traditionally, discretionary purchases like fine jewelry are the first to ebb when the economy takes a downturn and consumer spending slows. Since a majority of the store brands under Zales's Fine Jewelry segment target the middle income consumer base, the company is also more vulnerable to economic downturns than higher end jewelry sellers.

Competition

The U.S. and Canadian retail jewelry industry accounted for approximately $63 billion of sales in 2008, according to publicly available data. Zale Corporation has a 3% market share in the combined U.S. and Canadian markets. The largest jewelry retailer in the combined U.S. and Canadian markets is believed to be Wal-Mart (WMT). Other significant segments of the fine jewelry industry include national chain department stores (such as J.C. Penney (JCP)), mass merchant discount stores (such as Wal-Mart (WMT)), other general merchandise stores, specialty retail jewelers (such as Signet Group (SIG)) and apparel and accessory stores. The remainder of the retail jewelry industry is comprised primarily of catalog and mail order houses, direct-selling establishments, TV shopping networks (such as QVC , Inc.) and online jewelers.

ZLC vs. Competitors (2010 TTM)
Company Revenue (millions USD) Revenue Growth (%) Net Income (millions USD) Net Income Growth (%) Net Margin
Zales Corporation $1,630 -13.3% -$163 -81.8% -10%
Signet[3] $3,160 -3.8% $181 -36.5% 5.7%
Tiffany[4] $2,710 -5.3% $265 20.4% 9.8%
Blue Nile[5] $314 9.2% $13.2 20.4% 4.2%



References

  1. ZLC 2007 10K, Item 1, pg.4
  2. ZLC 2007 10K, Item 1, pg.7
  3. Wikinvest Data Central: Signet
  4. Wikinvest Data Central: Tiffany
  5. Wikinvest Data Centra: Blue Nile
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