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12% drop in Zale corporation sales
New position strategy effects brand positioning of Zales brand
By: Diamond World News Service
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Feb 20 2006 12:00AM
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Reference: 263  

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Zale Corporation reported earnings shy of $88 million for its second quarter of fiscal 2006. Profits for the quarter were down by 12%. "There had been a number of quarterly earnings misses, a number of internal financial targets missed, and our largest brand, Zales, saw its market share continue to erode, " said Betsy Burton, Interim company CEO.

Burton also announced that the board asked Paul Leonard, 51, to leave his post as president of Zales Jewelers, the companys largest division. John Zimmerman was appointed president of a newly-created North American division for Zale. Zale wrote-off inventory for the quarter ending January 31, 2006, and lease settlement costs related to closing 29 Bailey Banks & Biddle locations.

Revenue for the quarter stood at $994 million, up 2.3 percent with same-store sales up 1.4 percent. Year-to-date revenue is up 1.9 percent to $1.4 billion; and same-store sales are up 0.6 percent, but the company excluded the stores it closed.

"Upon review of Zales business, we concluded that the new strategy negatively impacted our brand positioning because it de-emphasized the value component and key diamond categories of the brands assortment," Burton said. Same-store sales for the third quarter are expected to remain flat the company reports.

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