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Zale Corporation Message Board

  • hapu.patel hapu.patel Aug 16, 2013 11:56 AM Flag

    Bought on sale at 9.10

    Thanks in due part to opex.....

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    • Holding my current shares and will add if this flatlines at 11 or 12.....

    • Should be an interesting conference call. They gave very explicit guidance, so I think they'll be ok for the july qtr. I think upside to revenues could come from Canada where comps have been relatively weak for the past year, but Canadian employment has been trending up. The Street estimates for next year are very reasonable too as they assume minimal revenue growth. Moreover, it appears that the company has loaded expenses into FY 13 (extra expenses in the October qtr which caused the miss, AT Kearney project finishing up in the July qtr). That sets up for easier comps on the expense front in FY 14.

      It will be interesting to see what they decide to do with the cash they received from the Alliance deal. They could obviously pay down debt, but it's low cost now (particularly on an after-tax basis), so I think that's a mistake. I would rather see them selectively add stores and do some remodeling to spruce up existing stores. Having Terry Burman on board should really help with growth initiatives, particularly adding new stores, given his familiarity with SIG's growth strategies. I think he should help a lot on the merchandise front given his relationships with key vendors.

      If you think about the incremental margins in this business, they are extraordinary with gross margins in the low 50s. Given the company is finally at breakeven, we could see a lot of earnings leverage next year and beyond. That should merit a higher multiple as long as revenues improve.

    • BTW it's looking like the little run in both directions was options driven and should head back up shortly.....

 
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