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Diamond in the Rough

Zale suffers severe profits drop

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Zale Corp. (Dallas), the nation's largest specialty jewelry retailer, announced a 15 percent drop in profits for the quarter ending Jan. 31, 2001, and same-store sales fell 2.3 percent. The company warned that earnings for the next six months would fall sharply from a year ago.

Some of the fall-off was attributed to a non-recurring charge of $25.2 million, to adjust the valuation of such inventory. When Robert J. DiNicola returned as chairman and ceo, an in-depth company review determined that the quality of its inventory was not consistent with the strategic direction of the brands.

“The long-term opportunities for Zale Corp. remain substantial,” DiNicola said. “However, near-term expectations have been tempered to account for a slowdown in consumer spending, the repositioning of inventory within the brands and a realignment of fiscally prudent marketing plans. Each of these initiatives is designed to ensure that all of our brands are positioned to capture market share gains on a long-term basis.”

Zale has about 2300 stores throughout the U.S., Canada and Puerto Rico, under three nameplates for three different consumer markets: Zales Jewelers (moderately priced items), Gordon's Jewelers (more expensive contemporary and regional items) and Bailey Banks & Biddle Fine Jewelers (higher-priced items). Zale also operates more than 65 jewelry outlet stores, runs about 170 Peoples Jewellers in Canada and owns about 95 percent of kiosk jeweler Piercing Pagoda.

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