Gil Hollander, Zale's chief merchandising officer, late last month wrote to one supplier: "We are looking to trade inventory (mostly diamond fashion), at our full cost, with an agreement to purchase 2x's that amount over the next year," according to a copy of the email reviewed by the Wall Street Journal.
That's basically a really expensive way of borrowing money! Just defers the problem a bit. One point in ZLC's favor was that they have close to a billion dollars' worth of inventory - but maybe much of it is junk. Tomorrow I'll take a look at the inventory/sales ratio over time.
To preserve funds, Zale also has canceled much of the advertising it had planned for Valentine's Day as well as Mother's Day, said people close to the company. These are the two biggest jewelry sales holidays after Christmas, which accounts for almost 70% of Zale's profit. The company declined to comment.
Ouch. That's not going to work well.