Zale says activist investor Breeden joins board

NEW YORK (Reuters) - Struggling retailer Zale Corp (ZLC.N) said on Friday that activist investor Richard Breeden, who has been building a stake in the jeweler, and his partner James Cotter have joined its board.

Breeden Capital Management, the investment firm started by Breeden to invest in undervalued companies, has amassed an 18.1 percent stake in the jeweler, and Breeden appears poised to push for quick changes at the retailer.

Zale shares rose 3 percent to $14.90 in morning trading on the New York Stock Exchange.

"We believe that there are major opportunities for Zale to strengthen its profitability and its market value," Breeden said in a statement.

"We are excited to join with the board and the Zale management team in pursuing those opportunities with vigor and immediacy."

Zale has been streamlining its operations to try to boost its core mall-based sales. Late last year, it named Neal Goldberg, a retail veteran and a recent president of Children's Place Retail Stores Inc, as its chief executive.

But the jewelry sector has been hurt by a slump in the U.S. economy. Zale said sales at stores open at least a year fell 9 percent during the holiday season, as cash-strapped consumers pulled back on discretionary purchases in the face of rising food and gasoline prices and a troubled housing market.

Breeden has said in regulatory filings that he believes Zale's stock is undervalued and that he might try to initiate a major transaction at the company.

Zale said the addition of Breeden and Cotter expand its board from six members to eight. The retailer said it is searching for an additional independent director that would bring the board to nine members.

(Reporting by Nicole Maestri; Editing by Derek Caney and John Wallace)