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Zale cuts staff, shuts stores

February 28, 2008

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Irving, Texas—Zale Corp. plans to layoff 140 employees and close another 23 stores in fiscal year 2008 in what the company is billing as an "operational efficiency program."

In a news release issued by the struggling Irving, Texas-based jeweler, the company stated the cutbacks, combined with a $100 million inventory reduction, should result in more than $65 million in ongoing, annualized savings beginning in the fourth quarter of fiscal 2008.

The layoffs will affect 140 employees who work at company headquarters. In addition, the company will eliminate another 85 open positions, resulting in a 20 percent reduction in headquarters staff and a $15 million in corporate payroll savings per year.

In addition, the company, which announced a round of store closings last month, stated it will now close another 23 stores, bringing the total number of store closures for fiscal 2008 to 105.

Zale Chief Executive Officer Neal Goldberg, who was hired in December, said it is necessary for the company to reduce costs, which have outpaced sales growth since 2002.

"Creating a culture of cost discipline and financial rigor is vital to Zale's ongoing success," he said in a news release. "While we recognize that expense saves will help drive efficiencies in the near-term, our ultimate success will come from optimizing the balance between top-line growth, margin expansion and expense control. These actions are difficult for our entire organization but are important steps in order to connect us more closely to our customers."

Like many retailers, Zale suffered as a result of the slow 2007 holiday season, with same-store sales slipping 9 percent and total revenues down 10.1 percent in November and December.
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