With sales continuing to plunge for specialty jewelry retailer Zale Corp. (NYSE:ZLC), Citibank (NYSE:C) will no longer provide financing for the credit cards of the company as of March 2011. according to a regulatory filing at the end of trading on Thursday.
Zale hasn’t been able to stop the continuing loss in market share it has been experiencing for years, and the drop in November sales of 18.6 percent has generated a lot of conjecture and buzz on what the future holds for the company, as the majority of its sales and profits are experienced over the final three months of the year.
It won’t be known until the January report on December sales how the company performed, with most of those sales occurring the week before Christmas historically for the company.
Just in the short time since the day before Thanksgiving the stock has plummeted on the poor sales of Zales, dropping by over half from $5.26 at close on the day before Thanksgiving to $2.47 on the day before Christmas at closing.
Responding to questions on whether the company has hired or been working with Rothschild, David Sternblitz, the treasurer at Zale, said this: “Once we’ve finished the holiday, we’ll evaluate our business the same way we do every year.”
Other unsubstantiated rumors swirling around Zales has them possibly merging with one of their major rivals Signet Jewelers, which is better known as the owner of Kay Jewelers. Much of that speculation probably has been generated because the two companies had been in talks a couple of years ago to merge. This is probably just a fishing expedition by financial reporters, but in the current economic climate it could definitely be a possibility.
Other ideas that could be part of a restructuring plan would be to sell its Piercing Pagoda unit, or possibly selling its Canadian stores. At this time Zales has a little over 1,900 retail outlets combined.
With credit card use probably set to plunge for some time to come, and the jewelry business probably going to suffer for several years as far as sales go, Citibank is probably looking at the long term strategy of providing financing for Zales credit cards as not a highly profitable business to continue in.
The existing private label credit card financing for Zales by Citibank is in regard to a Merchant Services Agreement for customers in the United States.