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Report: Zale turning to suppliers for cash

February 04, 2010

Irving, Texas--Struggling jewelry retailer Zale Corp. has taken the unusual measure of asking its vendors if they would purchase some of its inventory for cash, The Wall Street Journal reported Thursday.

According to the Journal report, Zale is asking diamond merchants and other vendors to buy back old jewelry--including pieces they did not manufacture--in exchange for a promise of future orders from Zale.

Vendors told the Journal that they are hesitant to agree to the deal.

Zale spokesman Steve Massanelli told National Jeweler that the company had no comment on the news report.

In the story, the Journal cites an e-mail that was apparently written in late January by Zale Chief Merchandising Officer Gil Hollander asking one supplier to trade mostly diamond fashion inventory at full cost for an agreement by Zale to purchase twice that amount of inventory over the next year.

While it is not uncommon in the jewelry industry for retailers to ask their suppliers to swap new merchandise for old stock that isn't selling, Zale is asking vendors to write a check for exactly the amount Zale paid for the jewelry, which is unusual.

Citing sources, the Journal also reports that Zale has canceled much of its planned Valentine's Day and Mother's Day advertising, and has been attracting attention from potential investors who are interested in buying all or parts of the chain, or providing capital in exchange for an equity stake.

Zale is coming off a disappointing holiday season in which same-store sales slipped 12 percent.

By comparison, competitor Sterling Jewelers, operator of Kay Jewelers and Jared the Galleria of Jewelers, saw same-store holiday sales climb nearly 8 percent.
 
Almost immediately after the discrepancy between the two chains' sales became public, Zale Chief Executive Officer Neal Goldberg and two other top executives resigned: William Acevedo, chief stores officer, and Mary Kwan, chief merchandising officer.

Company President Theo Killion is serving in the additional role of interim CEO.
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