Summary
1. Zale Corporation plans to close 23 stores. 2. They are also reducing staff at its head quarters by 20 percent. 3. It implements a streamlining program to cut expenses by $65 million a year. 4.We can also say that its an impact of recession or weak market.
Analysis
Zale Corporation is planing to close 23 “underperforming” stores and reduce staff at its head quarters by 20 percent, as it implements a streamlining program to cut expenses by $65 million a year.
Zale announces that total number of intended store closures to 105 in fiscal 2008 ending July 31. Zale would reduce inventory by $100 million based upon a detailed review by category and item. As part of the program, Zale has eliminated approximately 140 filled and 85 open positions, which it expects to reduce corporate staff payroll by about $15 million, or 20 percent per year, and non-selling field payroll by $8 million. In addition, around $40 million of non-compensation expenses such as consulting, marketing, and travel are to be eliminated, representing 20 percent of such expenses, as well as $2 million related to distribution.
Zale shares rose 9 percent to $19.56. The change in plan is reviwed and adopted after management conducted a “comprehensive review of operating and capital expenses in consultation with the board of directors” following a weak string of quarterly results. The program would reduce its capital spending from $85 million in fiscal 2008 to approximately $45 million in fiscal 2009, and will first affect cost cuts in the fourth quarter of fiscal 2008 ending July 31. The company expects to save $5 million in the fourth quarter. The total anticipated cost of the program, including severance-related benefits, amounting to less than $4 million pre-tax, will be incurred the third quarter ending April 30, 2008.
Zale recently reported profits fell 32 percent to $52.7 million in second quarter (which included Christmas) while revenues slipped 7 percent to $828 million, saying it plans to “become a more nimble and efficient organization.” “In order to improve Zale’s overall performance and provide a value-oriented customer with an exceptional experience, it is essential that they should reduce the company’s infrastructure costs, which have outpaced its sales growth since 2002. “The program they are announcing follows an extensive review, and will enhance thier operational effectiveness significantly. It builds upon steps that they have already taken to reduce redundancies, simplify processes and create a more agile company, such as the realignment of our merchandise and sourcing organizations.” “While they recognize that expense saves will help drive efficiencies in the near-term, our ultimate success will come from optimizing the balance between top-line growth, margin expansion and expense control. These actions are difficult for thier entire organization but are important steps in order to connect them more closely to coustomers.
It is the good thing to do at this time beacuse as we have experinced weak sales and low market reports in 2008 and from last few months and last Christmas Season Sales very were weak, so cutting in revenues and Cost is a good thing to deliver Best and effective market conditions to its stores.
