In light of the souring economy, consumers are cutting discretionary spending, so they are buying less bling, bling and bustiers and therefore putting a damper on retailers like speciality chains such as Zale Corp. and Limited Brands Inc. The two companies announced restucturings to offset aniticipated slower earnings for 2008.
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Jewelry retailer Zale announced Thursday it would close an additional 23 stores as well as lay off 140 people and eliminate 85 unfilled positions at its headquarters in Dallas. In addition, the company would cut capital spending to $85 million in 2008 to $45 million in fiscal 2009. The cuts overall could save Zale more than $65 million a year. The strategy was probably a direct result of recent board changes that include the addition of activist investor Richard Breen and two others, noted the New York Post.
Meanwhile, the operator of Victoria's Secret and Bath & Body Works chains, Limited Brands, also said Thursday that it has cut the number of real estate projects planned for 2008 to improve earnings. This change follows Limited's slack fourth-quarter earnings and lowered sales projections for February. The company said same-store sales in February are expected to fall in the low-double-digit range on a percentage basis compared to analysts' original prediction of same-store sales in the mid- to high-single digits.
The news of the restructurings happens to come on the heels of some recent notable retail bankruptcies including Sharper Image Corp. and Lillian Vernon Corp. In total, there have been 96 bankruptcy filings in the industry over the last 12 months, according to The Deal's Bankruptcy Insider. Could Zale and Limited be next on the list? - Gerald Magpily
See New York Post article
See The Dallas Morning News article
See TheDeal.com: Breeden wins seat at Zale's table
See Dealscape: Sharper Image, Lillian Vernon the latest retailers in Ch. 11
Comments
Wow the economy has gotten that bad? Hopefully things will turn out better.