Profile: Zale Corporation (ZLC)

Zale Corporation, incorporated in 1993, is a specialty retailer of fine jewelry. As of July 31, 2009, the Company operated 1,247 specialty retail jewelry stores and 684 kiosks located in shopping malls throughout the United States, Canada and Puerto Rico. It operates in three segments: Fine Jewelry, Kiosk Jewelry and All Other. During the fiscal year ended July 31, 2009 (fiscal 2009), the Fine Jewelry segment generated approximately 86% of the Company’s net revenues, while the Kiosk Jewelry segment revenues represented 13% of total revenues. During fiscal 2009, the Company closed a 191 underperforming locations, of which 160 were fine jewelry stores and 31 were kiosks.

Fine Jewelry

The Company’s Fine Jewelry segment consists of five brands, each of which specializes in fine jewelry and watches, with merchandise and marketing emphasis focused on diamond products. Zales Jewelers is its national brand in the United States, providing jewelry to a range of customers. Through Zales Outlet, the Company focuses on a slightly higher-income female customer in outlet malls and neighborhood power centers. Gordon's Jewelers is a regional jeweler that focuses on local fashion styles within each market.

Peoples Jewellers is Canada's fine jewelry retailer. Mappins Jewellers offers Canadian customers a range of engagement rings. Zales operates 693 stores in 50 states and Puerto Rico. Gordon's operates 202 stores in 31 states and Puerto Rico. In Canada, the Company operates 212 stores in nine provinces. Canadian operations consist of two brands: Peoples Jewellers and Mappins Jewellers, which accounted for approximately 14% of its total revenues during fiscal 2009.

Kiosk Jewelry

The Kiosk Jewelry segment operates under the brand names, including Piercing Pagoda, Plumb Gold and Silver and Gold Connection (collectively, Piercing Pagoda) through mall-based kiosks. As of July 31, 2009, Piercing Pagoda operated 684 locations in 41 states and Puerto Rico. The Kiosk Jewelry segment specializes in gold and silver products, including entry level diamond merchandise. The Kiosk segment offers a range of bracelets, earrings, charms, rings, and 14 karat and 10 karat gold chains, as well as a range of silver and diamond jewelry. In addition, trained associates perform ear-piercing services on site.

All Other

Zale Corporation provides insurance and reinsurance facilities for various types of insurance coverage, which are marketed primarily to its private label credit card customers, through Zale Indemnity Company, Zale Life Insurance Company and Jewel Re-Insurance Ltd. These three companies are the insurers (either through direct written or reinsurance contracts) of its customer credit insurance coverage. In addition to providing merchandise replacement coverage for certain perils, credit insurance coverage provides protection to the creditor and cardholder for losses associated with the disability, involuntary unemployment, leave of absence or death of the cardholder. Zale Life Insurance Company also provides group life insurance coverage for its eligible employees.

Credit insurance operations are dependent on the Company’s retail sales through its private label credit cards. During fiscal 2009, approximately 36% of its private label credit card purchasers purchased some form of credit insurance. During fiscal 2009, the All Other segment accounted for approximately 1% of its total revenues.

The Company competes with Wal-Mart Stores, Inc., J.C. Penney Company, Inc., Signet Jewelers Limited and QVC, Inc.