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Zale Corporation Message Board

  • stocktrader486 stocktrader486 Feb 11, 2013 1:06 PM Flag

    Zale Operating Margins

    Why does zale have 1 % operating margin and SIG have 10%... trying to get to the bottom of this answer... was wondering if anyone has any idea... looks like lease obligations and commodity costs is part of the reason, but why such a major difference.

    Does anyone thing they can fix this situation reasonably?

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    • Store productivity...SIG's stores generate on average $2mm in revenue and ZLC's ~$1.4mm...therein lies the opportunity to narrow the productivity gap both through improvements to existing stores and some store closures of underperforming stores. It's really a scale issue...

      SIG also runs an internal credit program, which generates incremental margins...ZLC outsources its credit to third parties...

      With all that said, there is big upside potential if ZLC can even achieve half the operating margins of SIG.

      • 1 Reply to cdti17
      • do you think zale can accomplish it? that means we have to continue to shut down all the non-performing stores and increase the ability of each store to have more incremental revenue.

        Does zale have the possibility to have its own internal credit program? Does the outsourcing have exponential costs that affect its operating margins?

        Can zale appear to higher end TIF consumers ever? Or is that a lost cause... I know vera wang has helped ab it...

        It seems to me that sales needs to continue to improve, margins need to become better and a relief in commodity pricing and fx rates would also help...

        The refinancing obviously will help bottom line earnings...

        End of story are you in before earnings or waiting until afteR??

        Zale is one of the most interesting stocks on the market now all considering what we have discussed... I am glad to see someone else can intelligently breakdown the company with me.

        Let's also talk debt for a moment... Zale can't hope to pay off their debt until their margins are better and they become profitable...

        This is a major concern for me in value... but from a revenue/sales perspective zale is half what signet is and is trading at 151M market cap... but this is because of the lousy margins... but you are talking about a 150M market cap vs. a 5B market cap on a company with comparable sales.

 

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