Last Updated Jan 15, 2010 11:29 AM EST
Competitor Tiffany & Co. (TIFF), though, is an example of the recent trend of luxury retail actually bouncing back, at least temporarily. The chain posted extremely strong holiday sales, as revenue at U.S. stores open at least a year jumped 12 percent in November and December, causing management to raise full-year financial projections.
Meanwhile, Zale's holiday season was dismal. Same-store sales fell 12 percent year over year in November and December, while total sales plunged 15.1 percent, dropping to $494 million. November proved especially tough for Zale, when comparable sales dove 18.6 percent.
Zale's problems began far before the holiday season. The retailer lost just under $90 million in its third quarter and almost $97 million for the entire fiscal year. And the 1,900-store company closed nearly 200 units during the period.
Nicholas White, a former Zale executive, told the Wall Street Journal, that the company's problems stem from a "lack of merchandise variety, higher prices, marketing and staffing moves 'conspire together to create the problems they've got.'"
To be fair, Tiffany is a lot smaller than Zale, with only 220 stores internationally. Plus, the company's sales were less than stellar for much of the year, with same-store sales falling 6% in the third quarter and plunging 16% in the second quarter. So it is possible that Tiffany could have just experienced a pent up holiday spike that some other luxury retailers experienced during the holidays. The chain also might have gotten a boost because so many independent jewelers closed last year.
Zale's larger competitor, Signet Jewelers (SIG), with nearly 1,400 U.S. stores, did see a holiday same-store sales uptick of 7.6 percent domestically, though that retailer's management is cautious about net cash generation for the coming year.
Zale's problems are obviously deeply entrenched, and Tiffany has at least a few advantages in the current market. We'll see how the latter fares, though, now that people finished their holiday shopping and are no longer looking to give high-priced gifts.