Zale Corporation released its earnings for the first quarter of fiscal 2013 after hours Tuesday, leading shares to drop more than 10 percent on news of a loss of 88 cents a share. Analysts were expecting a loss of 68 cents a share, according to surveys by FactSet. Despite an improvement to the bottom line of $4 million from same quarter last year, the company was nevertheless still left with a net loss of $28 million. Zale cites Hurricane Sandy, unexpected increased [SG&A] selling, general and administrative costs, and overall [increased inventory growth] as the main reasons for falling short of estimates.
Losses from Sandy are approximately $1 million due to almost 400 retail locations being simultaneously closed from power outages at the end of October. Fortunately, no permanent damage occurred to stores, and affected area sales are expected to pick back up quickly in November and December.
Unexpected high levels of employee benefit claims led SG&A costs to increase by about $2 million, totaling around $6.5 million, as of October 31, 2012. At the same time, the company says it’s closely managing marketing costs during the upcoming holiday season.
The holiday season is unarguably Zale’s best sales quarter, and the company has brought on a new designer. Shaquille O’Neal introduces his new line of [steel] jewelry sold at Zale’s in a new YouTube video uploaded two weeks ago. In the video, Shaq comes out of retirement to assist shoppers at the Willow Bend Mall in Dallas, saying, “How can I help you brother… what you like? Earrings, bracelets, necklaces?”
For a jewelry company that’s struggling with how to reach its middle-market demographic, bringing in a celebrity like O’Neal could help customers better recognize with the entire brand.
In the video, which has over 120,000 views, Shaq explains, “I think I am going to help the Zale’s team a lot, because if there is one thing I know how to do, it’s how to read people. I know how to sell. I’m the type, like if a home boy come in, I’m like ‘what up player?’ If a nice business man comes in I’m like, ‘Hello sir, how can I assist you?’ If a sexy lady comes in, you know I know the language of the ladies.”
Along with the homeboys and the businessmen, sexy ladies are a market Zale’s hopes to entice with the introduction of candy colored diamonds and gemstones. With the wide assortment and variety of colored diamonds and gemstones, Zale hopes to fulfill the [growing trend of colorful jewelry for young women.]
