DINICOLA EXITS ZALE, RAFF TAKES CEO POST
Byline: David Moin / Melanie Kletter
NEW YORK — After spending six years refocusing and rebuilding Zale Corp. and putting it on the fast-growth track, Robert J. DiNicola has stepped down as chief executive officer and has been succeeded by Beryl Raff, a longtime associate.
DiNicola will remain chairman, and Raff will continue as president, become a member of the board, and drop the title of chief operating officer.
Under the succession plan, Raff will take over the day-to-day running of Zale, the nation’s largest jewelry retailer. However, DiNicola said in an interview Tuesday that he will be involved in developing new strategies, including e-commerce, and exploring possible acquisitions. He also said he will be working to expand the store base.
Zale has been conducting e-commerce on the web for about two years and is expected to post roughly $5 million in sales this year.
“We see Zale.com as a $100 million business in three to five years,” DiNicola said. He added that jewelry is already successfully selling on various sites on the web and through other forms of direct selling and noted that the two major home shopping channels, QVC and Home Shopping Network, do a combined $1 billion in jewelry sales annually.
The change at the top comes amid a period of strength for the Dallas-based specialty retailer. On Tuesday, Zale also reported that fourth-quarter earnings jumped 14.6 percent on a 16.1 percent gain in sales. Investors reacted enthusiastically to the announcements, sending the shares up 2 5/16 to 37 1/2 on the New York Stock Exchange.
DiNicola said the transition would be orderly, particularly since he has known Raff for about 20 years, ever since the two worked in the home area of Macy’s, where he was a buyer and she was an assistant.
DiNicola recruited Raff to Zale not long after he joined the company in 1994, and had long ago designated her as a possible successor. Though starting her career in the home area, Raff quickly moved into merchandising jewelry in 1983 at Macy’s in New Jersey, while DiNicola rose up the ladder in the home area, eventually becoming senior vice president of the home department for the Rich’s division of Federated Department Stores in 1989. From 1991 to 1992, he was president of Federated’s Bon Marche division in Seattle, rising to chairman and ceo there in 1992.
Among the highlights of her career, Raff was senior vice president of Macy’s East’s jewelry business in 1991. She joined Zale in 1994 as president of the Zales Jewelers division and was promoted to president and chief operating officer of the corporation in July 1998.
DiNicola said no major changes in the corporate direction or daily operation of the company are anticipated.
“These moves are essentially strategic and long-term in nature,” he said.
When he first joined Zale, DiNicola discovered it was being run like a loose network of mom-and-pop shops, with some stores even closing early for inventory during the peak Valentine’s Day period. But he refocused the business by closing many doors, eliminating a host of nameplates in different regions of the country and giving the remaining three divisions — Zales Jewelers, Gordon’s Jewelers and Bailey Banks & Biddle — clearer images, pricing, merchandising and growth strategies. Some say he patterned the repositioning of the three Zale chains after Federated’s “good, better, best” formula for its Stern’s, Macy’s and Bloomingdale’s divisions.
In the quarter ended July 31, profits jumped to $8.5 million, or 23 cents a diluted share, from $7.5 million, or 20 cents. Excluding a gain from the sale of land in the year-ago period, earnings surged 47.3 percent from $5.8 million, or 16 cents.
Sales jumped 16.1 percent to $326 million from $280.9 million, and same-store sales grew 5.6 percent.
In addition to its core Zales Jewelers stores, Bailey Banks & Biddle and Gordon’s, Zale operates Peoples Jewelers Corp., a Canadian jewelry chain with about 175 stores that was acquired in June for $78 million. In total, Zale operates 1,330 stores.
For the year, Zale’s earnings climbed 17.4 percent to $80.9 million, or $2.21, from $68.9 million, or $1.84. Sales advanced 8.8 percent to $1.43 billion from $1.31 billion, and same-store sales rose 6 percent. The year-ago period included gains of $9.1 million related principally to the sale of land. Excluding these gains, earnings grew 27.8 percent from $63.3 million, or $1.70 a share.
DiNicola said the company’s outlet business has been performing “exceptionally well,” with the units each averaging more than $1 million in sales. The company opened its first outlet store last year and now operates 31, with plans to have “at least” 150 in operation within the next three years, DiNicola said.
The company’s jewelry sales overall have been boosted by robust demand for platinum jewelry, which generally has higher price points and better quality levels. Zale has also seen brisk sales of diamonds and tanzanite jewelry, according to DiNicola.
“The jewelry business has been quite strong for the last several years, due to a number of factors, including a strong economy, changing demographics and the fact that the big players in the business have done exceptionally well,” he said. “Also, we have reconfigured ourself as gift-giving headquarters to appeal to customers all year long.”
Currently, Zale offers about 1000 stockkeeping units on the site, compared with the 1,750 it typically offers in its retail stores.
The company also said its board has approved a program to repurchase up to $50 million in stock. The purchases will be made from time to time on the open market through the current fiscal year. In June, Zale completed the $50 million repurchase plan initiated in September 1998.