netrashetty
Netra Shetty
Zapata Corporation (NYSE: ZAP) is a holding company based in Rochester, New York and originating from an oil company started by a group including the former United States president George H. W. Bush. Various writers have alleged links between the company and the United States Central Intelligence Agency.
Zale Corporation (NYSE: ZLC) is a mid-tier retailer of fine jewelry, operating approximately 1,900 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.
Zales has a tenuous market position because it lacks the scale of mass discount retailers like Wal-Mart, and its reputation as a mid-tier jewelry seller makes it difficult for it to compete for wealthier clients that frequent high end stores like Tiffany. The company's focus on middle income and young adult customers also makes it more vulnerable to economic downturns than its higher end competitors, because these two groups tend to reduce their spending more drastically than higher income customers.
Company Overview
Business and Financial Metrics
Third Quarter Fiscal 2010 Results[1]
Zale Corporation reported revenues for the quarter of $360 million compared to $379 million in prior year. Comparable store sales were down 2.2%, and gross margins increased 70 basis points to 50.8%. The company reported a net loss of $12.1 million, or $0.38 per share, compared with loss of $19.5 million, or $0.61 per share, in the prior year. The Company has closed a net amount of 149 retail locations since April 30, 2009 of which 6 were closed in the quarter ended April 30, 2010.
Business Segments
Zale reports its operations under three business segments: Fine Jewelry, Kiosk Jewelry and All Other.
Contents
1 Company Overview
1.1 Business and Financial Metrics
1.2 Business Segments
1.2.1 Fine Jewelry (86% of 2009 revenues)[2]
1.2.2 Kiosk Jewelry (13% of 2009 revenues)[2]
1.2.3 All Other (1% of 2009 revenues)[2]
2 Trends and Forces
2.1 Zales is sandwiched between high end and discount retailers
2.2 Fluctuations in the prices of diamonds and other commodities will impact Zales’s business
2.3 Zales is more vulnerable to economic downturns than its high end competitors
3 Competition
4 References
Fine Jewelry (86% of 2009 revenues)[2]
The Fine Jewelry segment is comprised of five brands focused on the value-oriented consumer. Each brand specializes in fine jewelry and watches, with merchandise and marketing emphasis focused on diamond products.
Zales Jewelers and Gordon's Jewelers
The U.S. based flagship, Zales is a leading brand name in jewelry retailing in the U.S., operating 693 stores in 50 states and Puerto Rico with an average store size of 1,687 square feet.[2] Gordon’s Jewelers operates 202 stores in 31 states and Puerto Rico with an average store size of 1,524 square feet.[2] Zales Jewelers’ and Gordon’s Jewelers’ combined revenues accounted for approximately 63 percent of the company's total revenues, with an average transaction value of $403 in fiscal year 2009.[2] Additionally, both brands operate as multi-channel retailers and serve internet customers through e-commerce sites zales.com and gordonsjewelers.com, which accounted for approximately three percent of total revenues in fiscal year 2009.[2]
Zales Outlet
Zales Outlet focuses on higher-income female customers in outlet malls and neighborhood power centers. Zales operates outlet in 36 states and Puerto Rico, sales from which accounted for approximately nine percent of total revenues in fiscal year 2009.[2] The average store size is 2,337 square feet, with an average transaction value of $464 in fiscal year 2009.[2]
The outlet concept has evolved into three differentiated formats: power strip centers, traditional outlet malls, and destination centers. Zales stores feature items in every major jewelry category including branded watches, gemstones, gold merchandise, and diamond fashion and solitaire products.
Peoples Jewelers and Mappins Jewelers
Peoples Jewelers is Canada’s largest fine jewelry retailer that offers customers an assortment of affordable fine jewelry and a comfortable, accessible shopping experience.[2] Mappins Jewelers offers Canadian customers a broad selection of merchandise in a range of price points from engagement rings to fashionable and contemporary fine jewelry. In Canada, Zales operates 212 stores in nine provinces and enjoys the largest market share of any specialty jewelry retailer in Canada. Canadian operations accounted for approximately 14 percent of total revenues in fiscal year 2009. The average store size is 1,603 square feet with an average transaction value of $268 in fiscal year 2009.[2]
Kiosk Jewelry (13% of 2009 revenues)[2]
The Kiosk Jewelry segment operates through mall-based kiosks under the brand names Piercing Pagoda, Plumb Gold, and Silver and Gold Connection. This segment targets the opening price point jewelry customer. At July 31, 2009, Piercing Pagoda operated 684 locations in 41 states and Puerto Rico. The Kiosk Jewelry segment specializes in gold and silver products, including entry level diamond merchandise, that capitalize on the latest fashion trends. At the entry-level price point, the Kiosk Jewelry segment targets a young, fashion forward customer. The Kiosk segment offers an extensive collection of bracelets, earrings, charms, rings, and 14 karat and 10 karat gold chains, as well as a selection of silver and diamond jewelry, all in basic styles at moderate prices. In addition, trained associates perform ear-piercing services on site. Kiosks are generally located in high traffic areas that are easily accessible and visible within regional shopping malls. The kiosk locations average 188 square feet in size, with an average transaction value of $39 in fiscal year 2009.[2]
All Other (1% of 2009 revenues)[2]
Zale Corporation provides insurance and reinsurance facilities for various types of insurance coverage, which are marketed primarily to private label credit card customers, through Zale Indemnity Company, Zale Life Insurance Company and Jewel Re-Insurance Ltd. These three companies are the insurers (either through direct written or reinsurance contracts) of customer credit insurance coverage.[2]
Trends and Forces
Zales is sandwiched between high end and discount retailers
Given the number of players and the commodity-like nature of the product being sold, the retail jewelry business is extremely competitive and fragmented. ZLC faces increased competition from the growth of mass merchant retailers like Wal-Mart, the largest jewelry retailer in the combined U.S. and Canadian markets[3]. Discount retailers like Wal-Mart have aggressively pursued and captured a large portion of the price-sensitive consumer jewelry market. At the upper end, Zales must compete with stores like Tiffany, a company who has more successfully associated its brand with high-end jewelry items. Moreover, Zales must also deal with increasing competition from internet vendors like Blue Nile, which ranks just behind Tiffany and ZLC in diamond ring sales after just a decade in the business. Internet retailers are often able to sell the same product for much lower prices thanks to lower overall costs.
Fluctuations in the prices of diamonds and other commodities will impact Zales’s business
The supply and prices of diamonds in the world markets are significantly influenced by a single organization, the Diamond Trading Company[4]. This company controls the marketing of a considerable bulk of the world’s supply of diamonds. It also sells rough diamonds to diamond cutters at prices determined solely at its own discretion.
Zales is more vulnerable to economic downturns than its high end competitors
Traditionally, discretionary purchases like fine jewelry are the first to ebb when the economy takes a downturn and consumer spending slows. Since a majority of the store brands under Zales's Fine Jewelry segment target the middle income consumer base, the company is also more vulnerable to economic downturns than higher end jewelry sellers.
Competition
The U.S. and Canadian retail jewelry industry accounted for approximately $63 billion of sales in 2008, according to publicly available data. Zale Corporation has a 3% market share in the combined U.S. and Canadian markets. The largest jewelry retailer in the combined U.S. and Canadian markets is believed to be Wal-Mart (WMT). Other significant segments of the fine jewelry industry include national chain department stores (such as J.C. Penney (JCP)), mass merchant discount stores (such as Wal-Mart (WMT)), other general merchandise stores, specialty retail jewelers (such as Signet Group (SIG)) and apparel and accessory stores. The remainder of the retail jewelry industry is comprised primarily of catalog and mail order houses, direct-selling establishments, TV shopping networks (such as QVC , Inc.) and online jewelers.
ZLC vs. Competitors (2010 TTM)
Company Revenue (millions USD) Revenue Growth (%) Net Income (millions USD) Net Income Growth (%) Net Margin
Zales Corporation $1,630 -13.3% -$163 -81.8% -10%
Signet[5] $3,160 -3.8% $181 -36.5% 5.7%
Tiffany[6] $2,710 -5.3% $265 20.4% 9.8%
Blue Nile[7] $314 9.2% $13.2 20.4% 4.2%
Zale Corporation (NYSE: ZLC) is a mid-tier retailer of fine jewelry, operating approximately 1,900 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.
Zales has a tenuous market position because it lacks the scale of mass discount retailers like Wal-Mart, and its reputation as a mid-tier jewelry seller makes it difficult for it to compete for wealthier clients that frequent high end stores like Tiffany. The company's focus on middle income and young adult customers also makes it more vulnerable to economic downturns than its higher end competitors, because these two groups tend to reduce their spending more drastically than higher income customers.
Company Overview
Business and Financial Metrics
Third Quarter Fiscal 2010 Results[1]
Zale Corporation reported revenues for the quarter of $360 million compared to $379 million in prior year. Comparable store sales were down 2.2%, and gross margins increased 70 basis points to 50.8%. The company reported a net loss of $12.1 million, or $0.38 per share, compared with loss of $19.5 million, or $0.61 per share, in the prior year. The Company has closed a net amount of 149 retail locations since April 30, 2009 of which 6 were closed in the quarter ended April 30, 2010.
Business Segments
Zale reports its operations under three business segments: Fine Jewelry, Kiosk Jewelry and All Other.
Contents
1 Company Overview
1.1 Business and Financial Metrics
1.2 Business Segments
1.2.1 Fine Jewelry (86% of 2009 revenues)[2]
1.2.2 Kiosk Jewelry (13% of 2009 revenues)[2]
1.2.3 All Other (1% of 2009 revenues)[2]
2 Trends and Forces
2.1 Zales is sandwiched between high end and discount retailers
2.2 Fluctuations in the prices of diamonds and other commodities will impact Zales’s business
2.3 Zales is more vulnerable to economic downturns than its high end competitors
3 Competition
4 References
Fine Jewelry (86% of 2009 revenues)[2]
The Fine Jewelry segment is comprised of five brands focused on the value-oriented consumer. Each brand specializes in fine jewelry and watches, with merchandise and marketing emphasis focused on diamond products.
Zales Jewelers and Gordon's Jewelers
The U.S. based flagship, Zales is a leading brand name in jewelry retailing in the U.S., operating 693 stores in 50 states and Puerto Rico with an average store size of 1,687 square feet.[2] Gordon’s Jewelers operates 202 stores in 31 states and Puerto Rico with an average store size of 1,524 square feet.[2] Zales Jewelers’ and Gordon’s Jewelers’ combined revenues accounted for approximately 63 percent of the company's total revenues, with an average transaction value of $403 in fiscal year 2009.[2] Additionally, both brands operate as multi-channel retailers and serve internet customers through e-commerce sites zales.com and gordonsjewelers.com, which accounted for approximately three percent of total revenues in fiscal year 2009.[2]
Zales Outlet
Zales Outlet focuses on higher-income female customers in outlet malls and neighborhood power centers. Zales operates outlet in 36 states and Puerto Rico, sales from which accounted for approximately nine percent of total revenues in fiscal year 2009.[2] The average store size is 2,337 square feet, with an average transaction value of $464 in fiscal year 2009.[2]
The outlet concept has evolved into three differentiated formats: power strip centers, traditional outlet malls, and destination centers. Zales stores feature items in every major jewelry category including branded watches, gemstones, gold merchandise, and diamond fashion and solitaire products.
Peoples Jewelers and Mappins Jewelers
Peoples Jewelers is Canada’s largest fine jewelry retailer that offers customers an assortment of affordable fine jewelry and a comfortable, accessible shopping experience.[2] Mappins Jewelers offers Canadian customers a broad selection of merchandise in a range of price points from engagement rings to fashionable and contemporary fine jewelry. In Canada, Zales operates 212 stores in nine provinces and enjoys the largest market share of any specialty jewelry retailer in Canada. Canadian operations accounted for approximately 14 percent of total revenues in fiscal year 2009. The average store size is 1,603 square feet with an average transaction value of $268 in fiscal year 2009.[2]
Kiosk Jewelry (13% of 2009 revenues)[2]
The Kiosk Jewelry segment operates through mall-based kiosks under the brand names Piercing Pagoda, Plumb Gold, and Silver and Gold Connection. This segment targets the opening price point jewelry customer. At July 31, 2009, Piercing Pagoda operated 684 locations in 41 states and Puerto Rico. The Kiosk Jewelry segment specializes in gold and silver products, including entry level diamond merchandise, that capitalize on the latest fashion trends. At the entry-level price point, the Kiosk Jewelry segment targets a young, fashion forward customer. The Kiosk segment offers an extensive collection of bracelets, earrings, charms, rings, and 14 karat and 10 karat gold chains, as well as a selection of silver and diamond jewelry, all in basic styles at moderate prices. In addition, trained associates perform ear-piercing services on site. Kiosks are generally located in high traffic areas that are easily accessible and visible within regional shopping malls. The kiosk locations average 188 square feet in size, with an average transaction value of $39 in fiscal year 2009.[2]
All Other (1% of 2009 revenues)[2]
Zale Corporation provides insurance and reinsurance facilities for various types of insurance coverage, which are marketed primarily to private label credit card customers, through Zale Indemnity Company, Zale Life Insurance Company and Jewel Re-Insurance Ltd. These three companies are the insurers (either through direct written or reinsurance contracts) of customer credit insurance coverage.[2]
Trends and Forces
Zales is sandwiched between high end and discount retailers
Given the number of players and the commodity-like nature of the product being sold, the retail jewelry business is extremely competitive and fragmented. ZLC faces increased competition from the growth of mass merchant retailers like Wal-Mart, the largest jewelry retailer in the combined U.S. and Canadian markets[3]. Discount retailers like Wal-Mart have aggressively pursued and captured a large portion of the price-sensitive consumer jewelry market. At the upper end, Zales must compete with stores like Tiffany, a company who has more successfully associated its brand with high-end jewelry items. Moreover, Zales must also deal with increasing competition from internet vendors like Blue Nile, which ranks just behind Tiffany and ZLC in diamond ring sales after just a decade in the business. Internet retailers are often able to sell the same product for much lower prices thanks to lower overall costs.
Fluctuations in the prices of diamonds and other commodities will impact Zales’s business
The supply and prices of diamonds in the world markets are significantly influenced by a single organization, the Diamond Trading Company[4]. This company controls the marketing of a considerable bulk of the world’s supply of diamonds. It also sells rough diamonds to diamond cutters at prices determined solely at its own discretion.
Zales is more vulnerable to economic downturns than its high end competitors
Traditionally, discretionary purchases like fine jewelry are the first to ebb when the economy takes a downturn and consumer spending slows. Since a majority of the store brands under Zales's Fine Jewelry segment target the middle income consumer base, the company is also more vulnerable to economic downturns than higher end jewelry sellers.
Competition
The U.S. and Canadian retail jewelry industry accounted for approximately $63 billion of sales in 2008, according to publicly available data. Zale Corporation has a 3% market share in the combined U.S. and Canadian markets. The largest jewelry retailer in the combined U.S. and Canadian markets is believed to be Wal-Mart (WMT). Other significant segments of the fine jewelry industry include national chain department stores (such as J.C. Penney (JCP)), mass merchant discount stores (such as Wal-Mart (WMT)), other general merchandise stores, specialty retail jewelers (such as Signet Group (SIG)) and apparel and accessory stores. The remainder of the retail jewelry industry is comprised primarily of catalog and mail order houses, direct-selling establishments, TV shopping networks (such as QVC , Inc.) and online jewelers.
ZLC vs. Competitors (2010 TTM)
Company Revenue (millions USD) Revenue Growth (%) Net Income (millions USD) Net Income Growth (%) Net Margin
Zales Corporation $1,630 -13.3% -$163 -81.8% -10%
Signet[5] $3,160 -3.8% $181 -36.5% 5.7%
Tiffany[6] $2,710 -5.3% $265 20.4% 9.8%
Blue Nile[7] $314 9.2% $13.2 20.4% 4.2%
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