Sterling trumps Zale in fiscal 2005 sales

By Susan Thea Posnock APRIL 07, 2006 - Akron, Ohio --

The king of the U.S. fine jewelry hill for at least the past decade, Zale Corp. has been dethroned by Sterling in fiscal 2005 sales.

As shown in NATIONAL JEWELER's $100 Million SuperSellers report, to be released May 16, Ohio-based Sterling (a subsidiary of Signet) has moved ahead of beleaguered Zale with approximately $2.309 billion in U.S. jewelry and watch sales, versus approximately $2.178 billion for the Texas-based giant.

The sales figures for Zale—which ended its fiscal year July 31, several months before Sterling—do not include Canadian retail sales. Zale is still the largest U.S. chain in terms of number of stores, and both chains follow top seller Wal-Mart, which remains the largest retail jeweler in the states with estimated U.S. retail jewelry and watch sales of $2.7 billion.

Sales at Kay Jeweler increased 9.9 percent to $1.174 billion, and Jared saw sales of $534.2 million for the year, according to Sterling financial results released Wednesday. Signet, which began a diamond sourcing initiative in 2005, plans to pump $1 billion into new U.S. stores over the next five years.

Terry Burman, Signet Group CEO, attributes his company's positive move to continuous improvement in every aspect of the business, resulting in superior comparable-store (same-store) sales increases and the largest new-store growth expansion in the industry.

"The comp-store sales increases were achieved through extensive training systems, innovative merchandising programs—such as the Leo Diamond and the fashion gold initiative—and the largest advertising budget in the industry," he says.

Additionally, Burman cites extensive training systems for the store operations team, which he says has led to knowledgeable, motivated and enthusiastic associates."For example, there's a certified diamontologist in every store," Burman notes. "

In terms of marketing, we have the largest advertising budget in the industry and both the ‘Every Kiss Begins With Kay’ and ‘He Went to Jared’ campaigns have been well-received by consumers."

While Sterling's star rises, Zale faces challenging times. Following lackluster sales and loss of market share—which the company has attributed in large part to a shift from Zale's core Middle America customer to a slightly more upscale shopper—the company has seen major management upheaval since the beginning of the year. Four major executives have resigned, including CEO Mary Forte; COO Sue Gove; Paul Leonard, former president of Zales Jewelers; and Charleen Wuellner, co-president of Zale Outlet. Interim CEO Betsy Burton has been at the top since Forte's departure at the end of January. While the search for a permanent CEO continues, the company has restructured its national Zales division, combining it with the Canadian operations under the new Zale North America name. John Zimmermann, previously president of Zale Canada, was named president of Zale North America."

Kay's market share has increased, so we obviously have lost or continue to lose market share to Kay's," Burton said in a February conference call to investors. "In addition to that, J.C. Penney's has really become a big player in the jewelry market, and they clearly have become an increasingly viable competitor.

"While noting that Zale remains larger in North American sales, the company's vice president and treasurer David Sternblitz says the Zales brand, in particular, has seen this erosion. However, with Zimmermann on board, Sternblitz is optimistic about the company regaining its market position. "That's our goal, to reposition Zales appropriately to capture market share and be No. 1," he says. "We're going through obviously a period of transition here, so there are changes but the focus is on recapturing that market share.