Once-Fading Zale Has Polished Its Act and May Be Ready to Shine
Now that Zale is no longer on the rocks, is it ready to shine again?</br></br>Part of the answer will be found in the jewelry retailer's year-end earnings release, expected today. Zale's chief executive promises the company will post a profit for the fiscal fourth quarter ended July 31, something it hasn't done in the four years since it emerged from Chapter 11 bankruptcy protection. (The company earns most of its profits during the Christmas rush in December.)</br></br>And solid earnings would be just the latest sign that the retailer is poised to recapture the market share it started losing a decade ago due to ineffective management and overwhelming debt. Consider that just three years ago, annual sales volume at Zale's stores averaged $737,000. Today, volume averages more than $1 million, with same-store sales up 5.5% for fiscal 1997 compared with the prior year.</br></br>In addition, productivity is up. Since 1994, Dallas-based Zale has renovated two-thirds of its stores, adding 50% more counter space at those locations. Selling, general and administrative expenses now eat only 38% of sales, down from 44% in 1994. Moreover, by 2000, Zale expects to have increased the number of outlets run by its three major jewelry units to 1,350 from 1,068.</br></br>"They continue to be ahead of the plan when it comes to building the business," says Lynn Detrick, an analyst at the Houston securities firm Williams MacKay Jordan & Co, who rates the stock a "buy."