Zale Adds More Chiefs

Implications: As Zale adds a new Chief of Store Operations (CSO) to its executive suite, investors have to ask when they can expect a turn around plan.  Here's why it may take longer than they think.  

Analysis:  Zale announced it had hired a new executive vice president and chief stores officer.  The new hire will be responsible for store operations for all Zale brands.  That includes Zale, Gordon, Zale Outlet, Piercing Pagoda in the US and Peoples/Mappins Jewellers in Canada.  The second executive vice president hire in the first half of 2008, the company also named an EVP of Human Resources in January.  It is also the first time the company has named a Chief Stores Officer.  Zale has been criticized for its weak store operations function.  The former CEO, Betsy Burton, specifically focused on improving training and compensation for store employees in order to decrease staff turn over and improve sales productivity.  But her strategy didn’t work.  Store sales and employee retention continued to decline during her watch.  

This new CSO has a strong operations background especially in fashion apparel stores.  But just how relevant that experience is to Zale isn’t clear.  Unlike Banana Republic, jewelry isn’t bought; it’s sold across two feet of counter space and that is a big difference.  What happens in those two feet is worlds apart from keeping racks full, managing a changing room, and staffing a cash register.  While administration remains an important function in jewelry stores, closing the sale makes the difference between successful store and one that is mediocre.     

Another important difference in jewelry operations is the customer’s buying behavior.  Compared to apparel stores that may have hundreds of shoppers a day buying the latest clothing styles off the racks, traffic in a Zale’s store may be counted in the dozens, much less if diamond customers are counted alone.  Making the sale requires sales associates that can engage the customer with the purpose of establishing confidence in the brand and demonstrating competence in the product.   

One line of reasoning suggests that a good administrator can manage a wide range of businesses.  If true, it follows that a good chain store operator can manage any number of different retail brands.  Whether that is absolutely true is an ongoing argument between management experts.  But one thing is certain, the cross over is all the more difficult in a serious turn around company like Zale.   

However, the issue isn’t whether one CSO or another can make the difference at Zale.  The issue is the approach to the turn around.  Thus far Neil Goldberg’s approach has been text book retailing, but whether in a week, a month or a year, he will come to grips with just how different Zale is from any retail organization either he or any of his new team have experienced. 

He will learn first hand that despite looking simple, it’s a complicated, highly competitive business that doesn’t benefit from size the same way most big retailers do.    He will also find out that at the local level, one store looks pretty much the same as another to the consumer which means the influence of in store communication and product on both the sales associate and the consumer is different than in either soft or hard lines retailing. 

Lastly, he will find that he can’t recruit, hire, train, and retain 2,200 managers and 13,000 predominantly part time sales associates that are all statistically above average when compared to Zale’s major competition.   

The question for shareholders and prospective investors is: How long will it take for him to discover these things for himself and will he know what to do next?