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Zale Corp. Is Sparkling Again

April 7, 1999

DALLAS (AP) _ Zale Corp., America’s leading jewelry chain, is sparkling again.

Since the dark days of bankruptcy, the jewelry chain has posted five consecutive years of 20 percent annual growth primarily by keeping up with minimalist fashion trends and selling precious, although sometimes small, jewelry pieces to middle America.

``People say, `Let’s get the real thing rather than a piece of costume jewelry that you throw in a drawer,‴ Lynn Ramsey, president of the Jewelry Information Center, said of a renaissance in national jewelry sales. ``Zale has really benefited from that mindset.″

Of course, Irving, Texas-based Zale isn’t the only retailer cashing in on people’s growing preference for real gold, pearls and precious gems.

In 1997, sales volume for jewelry and watches was $1.67 billion at Wal-Mart; No. 2 Zale rang up $1.25 billion that year.

Still, Zale has the most stores in the United States _ 1,140 operating in this country and Puerto Rico under the names of Zales Jewelers, Zales Outlet, Zales Direct, Gordon’s Jewelers and Bailey Banks & Biddle Fine Jewelers.

The company has led the industry in an effort to cater to consumers who are becoming more value-conscious about their bracelets, necklaces and rings.

``It’s all part of people wanting to put their money into things that are lasting and that reflect quality,″ Ms. Ramsey said.

Analysts say independents, who control about 67 percent of the industry, have benefited least by Americans’ interest in fine jewelry. Instead, shoppers have headed to discounters and malls, where Zale stores are located.

Zale is celebrating its 75th anniversary this year, but its history hasn’t been all rosy.

The company grew to 1,800 stores in the 1980s. Heavy debt pushed it into bankruptcy in 1992 and forced the closure of 700 stores. The company emerged 18 months later lacking focus.

``The issues were that Zale had no direction. There was no business plan. Things were pretty broken at the time,″ said Robert J. DiNicola, Zale’s chairman and chief executive.

DiNicola came to the company in 1994 after spending 27 years in retail with Federated Department Stores and R.H. Macy & Co.

``Prior to my arrival there had been seven CEOs in six years,″ DiNicola said. ``The folks here at the corporation were somewhat skeptical and one could even say cynical. My objective was to keep it simple and go back to the fundamentals and sell the best jewelry possible.″

Collette Foreman, a store manager in Dallas for 15 years, said the management upheaval meant she and her colleagues were receiving mixed messages before DiNicola arrived.

``I worried that our checks would bounce, worried that our doors would close,″ she said. ``It’s an honor to work for a company that has redeemed itself.″

In the old days, Zale concentrated on diamond solitaires. The bridal business was 65 percent of all sales. DiNicola saw missed opportunities to lure in the customers who weren’t planning a trip down the aisle.

The company now has 30 percent bridal sales, 30 percent fashion jewelry sales, 30 percent gifts and 10 percent watches and other.

``I had a battery put in yesterday and I’m happy. It’s not too expensive,″ said Brigitte Laurant, a customer who said she appreciates the convenience of going to Zale while at the mall.

And DiNicola implemented other changes as well. Each store also used to buy two of each jewelry piece, or ``one to show and one to go.″ DiNicola instead pushed for an aggressive approach to inventory management, getting rid of the items that didn’t sell and concentrating on the top-movers.

He also refocused advertising to build Zale name recognition.

The changes have worked, analysts say.

``I think they’re doing a lot of things right and I really can’t think of anything they’re doing wrong,″ said Harry Ikenson, senior retail analyst for Hambrecht & Quist.

To capitalize on its accomplishments, Zale plans to open 75 new stores a year for at least three years. It also plans to continue remodeling stores to add more display area, which has been proven to boost sales.

The changes have grown the business from $900 million in sales in 1994 to around $1.5 billion for fiscal 1999. But DiNicola still isn’t satisfied.

Last month, Zale Corp. said it would buy Peoples Jewellers Corp., a privately owned chain of 175 jewelry stores in Canada, for about $75 million. DiNicola said it was ``a natural extension of our long-term plan to expand″ Zale operations internationally.

And DiNicola also plans to start opening stores outside the malls.

``With the Zale brand we can do things like online shopping for jewelry under the Zale banner,″ he said. ``Customers trust us, they know who we are. They know they can go to a store if they want to exchange. Trust is utmost in the jewelry business.″

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