No Zing In Bling

Posted: Sep 30, 2010 08:40 AM by Eugene Bukoveczky



Fewer Now Saying It with Diamonds

Judging by the recent sales data emerging from the jewelry industry, it now appears that the persistence of tough times for a sizable swath of middle America is continuing to force many to forgo those small relatively inexpensive items of "bling" that would normally be a natural purchase for anyone in a relationship. And that trend appears to be taking its toll on a once thriving industry.

Sales Slump Still Hurting Zales

Among the major casualties of this spending slowdown on jewelry is Zales (NYSE:ZLC), a jewelry retailer who's business targeting the "middle" jewelry market continues to suffer due to a combination of shrinking overall demand and intensifying competition over what remains. While the company managed to pare back its losses from horrendous to slightly better than expected in its latest quarter, the company's same store sales, a key measure of retail health, continue to head lower.

New CEO Pulls Company Back from Brink

Coming up with a new strategy to turn sales around will no doubt be uppermost on the mind of newly installed Zales' CEO, Theo Killion. His move into the top executive's seat comes after a several months of holding the reins on an interim basis during which time he navigated the company through a funding crisis and kept alive a critical relationship with Citigroup (NYSE:C), who arranges the issuance of the retailer's branded credit card. Roughly 40% of Zale's U.S. sales are made using those cards.

Sales Slowdown Industry Wide

But while Killion's recent efforts may have pulled the company back from the brink, turning it into a profitable operation won't be easy. The slump in "mid-market" jewelry sales looks to be broad and deep. Rivals such as Signet Jewelers (NYSE:SIG) and Tiffany & Co. (NYSE:TIF), whose overall sales numbers have been buoyed by recovery in sales to high-end customers, have nevertheless reported soft sales of lower priced items.

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