Zale Corp., the biggest U.S. jewelry chain, eliminated 20 percent of the positions at its headquarters, or 225 jobs, and will close more stores to save $65 million annually. The shares rose the most in six weeks.
The move to cut 140 jobs and 85 open positions at headquarters in Irving, Texas, will reduce labor costs there by $15 million, or 20 percent, Zale said in a statement. The retailer will shutter an additional 23 underperforming stores, bringing the total to 105 this year.
Zale had losses in four of the past seven quarters as mall traffic slowed and Kay Jewelers Inc. gained market share. Higher energy and food prices have prompted consumers to scale back on non-essential purchases such as for jewelry. Zale will reduce inventory by $100 million and almost cut in half capital spending to $45 million in 2009 from this year.
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Read about Zale Corp's financial woes over the past few years.
As the Wall Street Journal reports:
Zale's has struggled in recent years, going through several CEOs. Betsy Burton, a board member at Zale since 2003, took the helm two years ago amid weakening profits and a push to go more upscale, a decision that alienated customers and resulted in the resignation of Mary Forte. Burton departed in December and was replaced by Neal Goldberg, who was formerly at Children's Place Retail Stores Inc.
Last month former Securities and Exchange Commission Chairman Richard Breeden raised his stake in Zale to 18% and said there were "major opportunities for Zale to strengthen its profitability." He was named to the company's board last month.