Zale Project Report

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Acknowledgment All praises are for almighty ALLAH whose mercies are unlimited upon us, and HE who graced us with knowledge and wisdom. Who’s provided courage made us ambitious to learn the management of us and all that us posses. We are thankful to our teachers’ especially, Mr. Javed Zafar who dedicatedly broadened our vision through his ample experience and served as a lighthouse in this final project.

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Our customer relationships transcend yesterday, today and tomorrow just as the occasions. They are celebrating…. with jewelry from the zale family of brands.

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Our History In the 1920s, Morris (M.B.) and William Zale had a vision: to provide customers with quality merchandise at the lowest possible price. This vision became a reality when the first Zales Jewelers store opened in Wichita Falls, Texas, on March 29, 1924.With a credit plan of "a penny down and a dollar a week," the Zale brothers launched a marketing strategy considered to be revolutionary at the time, and thus made jewelry and other merchandise affordable to the average working American. Friendly customer service, liberal credit policies, and dedicated employees led to great success and expansion, with 12 stores in Oklahoma and Texas by 1941. During World War II, Zales Jewelers responded to the limited production of consumer goods by maintaining its current prices on jewelry, limiting expenses, and looking for growth opportunities. These efforts were rewarded in 1944 with the acquisition of Corrigan's of Houston, Zales' first "carriage trade" (fine jewelry) store, whose purchase eventually launched the Bailey Banks & Biddle brand. In 1946, Zales Jewelers moved its headquarters from Wichita Falls to Dallas. The corporate offices were housed in the Mercantile Bank Building, the first of several locations. The company continued to prosper and in 1952, a profit sharing plan was introduced to employees. Zales Jewelers took major steps in 1957 to broaden its reach in the marketplace. The first shopping center location was opened, marking a major shift from its strategy of operating only downtown stores. The same year, Zales announced the initial public offering of its stock (ZLC) and then began trading its public shares on the American Stock Exchange the following year. The 1960s were a decade of diversity. The 119-store chain began branching out into other markets - shoes, sporting goods, drug stores, and furniture and catalogue stores. In fact, the shareholders decided to change the company name to Zale Corporation to reflect the diversity of the business. The decade of the '70s brought continued expansion. Zale Corporation grew to more than 1,700 stores and posted a single-day sales record of $10 million. 4

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In 1984, Zale Corporation unveiled its newest acquisition - the 890-carat "Incomparable Diamond," the largest internally flawless diamond in the world. The next year, Zale moved its world headquarters into a 430,000-square-foot complex in Irving, Texas, and its current location. Peoples Jewelers of Canada and Swarovski International of Austria significantly altered the company’s history with the 1986 leveraged buyout of Zale Corporation. Expansion continued, however, with the purchase in 1989 of the Gordon's Jewelers chain of 469 stores. The 1990s marked another critical turning point for the corporation when it filed for Chapter 11 bankruptcy protection in 1992. The following year, the company emerged from bankruptcy after restructuring its debt. Five years later, 1998 became the "breakaway year" for Zale with annual sales that topped $1.3 billion - up from $920 million in 1994 - and a 25 percent net earnings growth (excluding unusual items). During its tremendous turnaround year, the company showed profit in all four quarters for the first time since the reorganization. That same year, Zales Outlet was launched, giving the corporation 13 locations in premier outlet centers in the United States. Expansion again became the primary growth strategy with two major acquisitions: Peoples Jewelers of Canada in 1999 and Piercing Pagoda, Inc. in 2000. In 2007, Zale divested the Bailey Banks & Biddle brand to focus on the core business and increase returns on capital. As a leading specialty retailer of fine jewelry, Zale now operates over 2,200 retail locations throughout the United States, Canada, and Puerto Rico under the following brand names: Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewelers, Mappins Jewelers, Piercing Pagoda, Plumb Gold, and Silver & Gold Connection. Zale also operates online at www.zales.com www.gordonsjewelers.com.

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“The

Mission of Zale Corporation is to be the best specialty retailer in North America. Our goal is to develop and maximize the finest collection of jewelry brands in order to build lasting customer relationships that will generate solid returns for our shareholders”

Improved Mission statement “The mission of Zale Corporation is to be the best specialty retailer in World. Our goal is to enhance our merchandise assortment to ensure that we offer styles that inspire and reflect the lifestyles of our customers.

“To provide customers with quality merchandise at the lowest possible price” “To be a world class jewelry provider 6

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to all classes”

Our Brands Zale Corporation offers customers an extensive selection of quality jewelry in a wide variety of price categories. Whether you are shopping for an addition to your personal jewelry wardrobe or you need a special gift, come to one of our stores for the best choices -- from fashion and contemporary styles to classic and traditional designs. Zales Jewelers: Nationally recognized authority on diamonds. Founded in 1924, "the Diamond Store" is the most recognizable name in fine jewelers. Zales Outlet Value-priced fine jewelry. A wide variety of jewelry is chosen for shoppers who prefer quality merchandise at less-than-retail prices. Gordon's Jewelers Classic to contemporary. Regional jeweler caters to local styles and tastes by offering unique designs in select markets. Peoples Jewelers The Diamond Store. The largest national jewelry retailer in Canada offers fine jewelry and brand name watches at affordable prices.

Mappins Jewelers Fine Jewelers since 1935. Customers across Canada can shop for classic fine jewelry and watches of exceptional value in stylish mall locations. Piercing Pagoda 7

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Fashion-forward. For customers who appreciate quality jewelry at everyday low prices, the gold kiosk leader offers an extensive selection of gold chains, charms, bracelets, rings, earrings, body jewelry, as well as silver and stainless jewelry. ZLC Direct

Quick and easy. Consumers who prefer to shop on the Internet have direct access to the online selection of quality merchandise from Zales Jewelers.

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INTERNAL ASSESSMENT

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INCOME STATEMENT The income statement good financial position of Zale Corporation. In the year 2007 firm Net Income is 59.252$ Million. 2007 In $ Million Sales

2437,075

Cost of Goods Sold

1194399

Gross Profit

1242676

Selling and Admin. Expenses

1070478

Other Expense

69071

Operating Income

103127

Interest Expense

18969

Earning Before Taxes

84158

Income Tax

24906

Net Income

59.252

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2007

2006

In $ Thousand

In $ Thousand

37643

42594

Inventory

1021164

903294

Other current assets

113511

103356

Total Current Assets

1172318

1049244

Property plant and equipment

304396

283721

Goodwill

100740

96339

Other Assets

35187

11316

ASSETS Cash & cash equivalents

Balance Sheet 1305

Deferred long term asset charges

---

1613946

1462568

Accounts payable

344957

403129

Other current liabilities

29501

---

Total Current Liabilities

374458

403129

Long-term debt

227306

202813

Other liabilities

40118

55377

Deferred long term charges

69491

---

Total Liabilities

711373

661319

Total Equity

902573

801249

1613946

1462568

Total Assets LIABILITIES

Total Liabilities & S.E

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Ratio Analysis 2007

2006

Current Ratio

3.13

2.60

Cash Ratio

0.10

0.11

Quick Ratio

0.10

0.11

Debt Ratio

0.44

0.45

2.43%

2.19

1.51

1.67

Net Profit Margin Asset Turnover

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Debt to Equity

0.79

0.82

Inventory Turnover

1.24

1.38

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Market Positioning Map The market-positioning map clearly shows that the Zale Corporation

has

a

better

perception in the mind of consumers because they are offering

a

high

quality

product at lower prices. That

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is why there market standings are better than other companies. In the above figure prices are measured on X-axis and quality on Yaxis, Where Zale Corporation is offering a quality diamond Jewellery at lower prices

Revenue of Zale Corporation by Segments

This chart showing the revenue of Zale Corporation by segment. Which clearly shows that Zales is generating more of their revenues from Zale segment. After that their Gordon’s jewellery segment is very strong.

Internal Factor Evaluation Matrix

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In the table below we have done the internal evaluation of the firm by taking some major factors as Strength and Weakness of the firm. After identifying the strength and weakness we assigned weight to them according to their importance. In rating column we assigned rate to each factor in this 1= Major Weakness, 2= Minor Weakness, 3= Minor Strength and 4= Major Strength. Then we multiplied the weight with rating and took the sum of score, Key Factors

Weight

Rating

Score

STRENGTHS Brand Name

0.13

4

0.60

Work experience

0.10

4

0.40

Trained personals

0.09

3

0.27

Innovative and creative

0.09

3

0.27

Targeting all segments in

0.08

3

0.24

0.07

2

0.14

Widely spread network of

0.10

3

0.30

Knowledge of diamond

0.08

2

0.16

Moderate price jewelry

WEAKNESSES Limited to North America

0.05

2

0.05

Decrease in inventory

0.06

1

0.06

Longer repositioning time

0.05

2

0.10

Not thinking Global

0.04

2

0.08

Advertisement

0.03

2

0.08

Total

1.00

2.68

which is 2.68, which shows that the firm is performing above average.

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External Assessment

Zale’s Competitors 17

18 1. blue Nile 2. SIGNET 3. Tiffany’s 4. JC Penney 5. HELZBERG DIAMONDS

Competitive Profile Matrix 18

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In the competitive profile matrix we compare the firm with its competitors by identifying critical success factors. After identifying these factors we assign weight and rate them. Then we multiply the rate with the weight. Then we take sum of all the score then we compare the score in the given table Zale’s score is 2 which is below average and shows a weaker position than competitors.

Zale

S core 0.66

Tiffany

Quality

Weig ht 0.22

Financial Position

0.15

3

0.45

2

0.30

3

0.45

Advertising

0.09

2

0.18

2

0.18

2

0.18

Market Share

0.10

2

0.20

3

0.30

1

0.10

Management

0.11

3

0.33

2

0.22

3

0.66

Technology

0.13

3

0.39

1

0.13

2

0.26

Global Expansion

0.10

1

0.10

2

0.20

1

0.10

Price Competitiveness Customer Loyalty

0.08

2

0.16

3

0.24

2

0.16

0.12

2

0.24

2

0.24

2

0.24

Total Score

1.00

Factors

Ratin gs 3

Signet

2.73

Rati ng 4

Scor e 0.88

Ratin g 3

Scor e 0.66

2.67

2.81

External Factor Evaluation Matrix 19

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In the given table we have done the external evaluation of the firm by identifying some factors as opportunities and threats of the firm. After identifying the opportunities and threats we assigned weight to them according to their importance. In rating column we assigned rate to each factor in this 1=Response is poor, 2= Response is average, 3= Response is above average and 4= response is superior. Then we multiplied the weight with rating and tookFactors the sum of score, which is Weights 2.72, which shows that theScore Rating firm is performing above average.

OPPORTUNITES

Open a Zale outlet in Europe

0.13

3

0.39

Innovative design to high-income group Diversification

0.11

4

0.44

0.09

3

0.18

Backward integration

0.08

2

0.16

Synthetic diamond

0.08

2

0.16

Strong competitors

0.08

2

0.16

Suppliers

0.05

2

0.18

Political situation

0.06

3

0.24

Global recession

0.07

3

0.27

Losing market share to JC penny

0.08

2

0.16

Natural resources

0.05

2

0.10

THREATS

Total Score

1.00

2.72

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BCG Matrix The BCG matrix is use to to rank the business units (or products) on the basis of their relative market shares and growth rates. Pilgrims pride lies in Cash Cows because they have low growth rate but their market share is very high.

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Recommendations • They should Start business in Europe to capture a market opportunity, because competitors of Zale are doing business globally, SIGNET is doing business in London, Tiffany in Japan and earning profit their market share is more than Zale. • Zale should do Backward integration because it is not manufacturing jewellery by itself, they purchase finished good from Italy, due to problem in external factor of Italy Zale also suffers in shape of late delivery of Goods.

• Zale should Target high-income group, they are currently targeting mainly Middle- class, but they can earn a lot from high-income group because Zale have more innovative styles in Jewelry. • Zale should do diversification in Bridal dresses, as they are specially known for Bridal jewelry so they have an opportunity to diversify I that business.

CONCLUSION Zale should consider the recommendation to start a business in European Market and also should Target high Income group.

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