Investor Day September 10, 2008

Transcription

1 Investor Day September 10, Zale Corporation. All Rights Reserved

2 Safe Harbor This presentation contains forward-looking statements, including statements regarding the Company's objectives and expectations regarding its sales and earnings, gross margin, merchandising and marketing strategies, consumer jewelry purchases over the next several years, store expansion, inventory management, capital expenditures, store productivity and business execution which are based upon management's beliefs as well as on assumptions made by and data currently available to management. In addition we may present information that would be considered non-gaap financial information. For a reconciliation of each non-gaap financial measure to the most directly comparable GAAP financial measure, please refer to the Company s most recent earnings release, which can be found on our website, under Financial Information and then News Releases. These forward-looking statements are not guarantees of future performance and a variety of factors could cause the Company's actual results to differ materially from the anticipated or expected results expressed in these forwardlooking statements. The following list, which is not intended to be an all-encompassing list of risks and uncertainties affecting the Company, summarizes several factors that could cause the Company's actual results to differ materially from those anticipated or expected in these forward-looking statements: if the general economy performs poorly, discretionary spending on goods that are, or are perceived to be, "luxuries" may not grow and may even decrease; the concentration of a substantial portion of the Company's sales in three, relatively brief selling seasons means that the Company's performance is more susceptible to disruptions; personnel costs are a substantial portion of the Company s expense structure and are difficult to control in the short-term; most of the Company's sales are of products that include diamonds, precious metals and other commodities, and fluctuations in the availability and pricing of commodities could impact the Company's ability to obtain and produce products at favorable prices; the Company's sales are dependent upon mall traffic; the Company operates in a highly competitive industry; because of the Company's dependence upon a small number of landlords for a substantial number of the Company's locations, any significant erosion of the Company's relationships with those landlords would negatively impact the Company's ability to obtain and retain store locations; changes in regulatory requirements relating to the extension of credit may increase the cost of or adversely affect the Company's operations; any disruption in, or changes to, the Company's private label credit card arrangement with Citi Commerce Solutions may adversely affect the Company's ability to provide consumer credit and write credit insurance; acquisitions involve special risks, including the possibility that the Company may not be able to integrate acquisitions into its existing operations; and certain other factors described from time to time in the Company's filings with the Securities and Exchange Commission. 2

3 Agenda 7:45 8:00 AM Buses depart Omni to Zale 8:00 8:30 AM Registration and Breakfast 8:30 10:00 AM Management Presentations / Q&A Neal Goldberg Theo Killion Gil Hollander Rodney Carter Steve Larkin 10:00 10:15 AM BREAK 10:20 10:30 AM William Acevedo EVP, Chief Stores Officer Mary Kwan EVP, Chief Merchandising Officer 10:30 11:50 AM Lab Store Tour & Merchandising Presentation 11:50 12:00 PM BREAK 12:00 12:30 PM Buses depart Zale to NorthPark Center 12:30 1:00 PM Pacesetter Store Tour 1:00 2:30 PM Lunch hosted by Senior Management Team 2:30 PM Buses depart for DFW Airport 3

4 Neal Goldberg Chief Executive Officer 2008 Zale Corporation. All Rights Reserved

5 Areas of Opportunity Appointed CEO December 20, 2007 Initial observations Industry competed on price Shopping experience confusing Poor quality Inefficient organizational structure Not valuing field organization Marketing doesn t cut through/disguised emotion 5

6 6

7 Laying the Foundation Re-engage core customer Operational effectiveness Financial rigor and discipline 7

8 Laying the Foundation Re-engage Core Customer 40% SKU reduction $127M inventory clearance Newness 2,000 new items in Fall 08 Quality Marketing leads with Emotion Greater clarity of message Pacesetter program 8

9 Laying the Foundation Operational Effectiveness Depth, strength of team Alignment of organization stronger and leaner Elimination of duplicative processes Strong field focus 9

10 Laying the Foundation Financial rigor and discipline $100M permanent inventory reduction $65M plus in annualized savings Prudent real-estate/capital decisions emphasis on ROIC Repurchased $327M of stock buy-back 36% of shares retired 10

11 Theo Killion President 2008 Zale Corporation. All Rights Reserved

12 Laying the Foundation Re-engage core customer Operational effectiveness Financial rigor and discipline 12

13 Former Organizational Structure CEO Brand President, Zale/Canada CFO Brand President, BBB Brand President, Gordon s Brand President, Pagoda Brand President, Outlet Marketing E-Commerce Legal HR Real Estate 13 Direct Reports 13 Loss Prevention Supply Chain

14 Former Brand Organizational Structure Store Operations Merchandising Marketing Planning & Allocation 1 EVP Operations 1 SVP Operations 6 VP Operations 32 Sr. Dir Stores 8 VP DMMs 36 Buyers 1 SVP Marketing 2 VP Marketing 4 Sr. Dir Marketing 1 Dir. Marketing 2 Sr. Dir Planning 5 Dir Planning 64 Other Employees 7 Associate Buyers 48 Assistant Buyers 46 Detail Assistants 29 Other Employees 40 Merch. Planners 21 Other Employees 14

15 Former Brand Organizational Structure 13 direct reports to CEO Brand silos Functional redundancies Inconsistent processes Lack of leverage Competition amongst brands 15

16 Operational Effectiveness Neal Goldberg Chief Executive Officer Theo Killion President Rodney Carter EVP Chief Administrative & Chief Financial Officer Gil Hollander EVP Chief Corp Sourcing & Supply Chain Officer William Acevedo EVP Chief Stores Officer 16 Mary Kwan EVP Chief Merchandising Officer Steve Larkin EVP E-Commerce & Marketing

17 Operational Effectiveness Building Talented Teams Functional heads of each critical area One Company Redundancies taken out efficiency Goals aligned one financial focus Every link in the chain is accountable Strong field focus 17

18 Depth, Strength of Team Neal Goldberg 27 years of retail experience 27 years of total experience 18

19 Depth, Strength of Team Theo Killion 31 years of retail experience 33 years of total experience 19

20 Depth, Strength of Team Rodney Carter 20 years of retail experience 25 years of total experience 20

21 Depth, Strength of Team Gil Hollander 33 years of retail experience 33 years of total experience 21 Gold Etc.

22 Depth, Strength of Team Steve Larkin 28 years of retail experience 28 years of total experience 22

23 Depth, Strength of Team Mary Kwan 25 years of retail experience 25 years of total experience 23

24 Depth, Strength of Team William Acevedo 19 years of retail experience 19 years of total experience 24

25 Depth, Strength of Team Mary Ann Doran 29 years of retail and 30 years of total experience Cindy Gordon 15 years of retail and 22 years of total experience Steve Massanelli 11 years of retail and 31 years of total experience Susann Mayo 35 years of retail and 35 years of total experience Hilary Molay 21 years of retail and 27 years of total experience David Rhodes 39 years of retail and 39 years of total experience David Sternblitz 10 years of retail and 14 years of total experience Mark Stone 13 years of retail and 28 years of total experience 25

26 Depth, Strength of Team Diverse team with 22 years of average retail experience Qualified for needs of business 26

27 Gil Hollander EVP, Chief Sourcing & Supply Chain Officer 2008 Zale Corporation. All Rights Reserved

28 Operational Effectiveness Sourcing Responsibilities Former Sourcing Structure Just another vendor to brands Little focus on vendor performance or number of vendors No interaction with supply chain 28

29 Operational Effectiveness Sourcing Responsibilities New Sourcing Structure Sourcing owns vendor relationships Own best product best cost best quality best delivery Reward performance and stress accountability Vendor partnering less vendors, more strategic partners Efficiency throughout the supply chain 29

30 Operational Effectiveness New Teams Support Sourcing Organization Vendor and Product Development Vendor and Product Management Diamond Sourcing Quality Assurance Support product design, development & re-engineering Extensive technical background Production Identify best vendors Supply chain coordination Diamond procurement Manage diamond rooms Forecast needs Global team Culture of teaching partner with vendors to improve performance for both parties 30

31 Sourcing Strategy Sourcing now ensures Best product Best quality Best cost Best on-time delivery 31

32 Rodney Carter EVP, Chief Administrative & Chief Financial Officer 2008 Zale Corporation. All Rights Reserved

33 Laying the Foundation Operational effectiveness Financial rigor and discipline Re-engage core customer 33

34 Financial Rigor and Discipline Permeates all aspects of the business Operating decisions Inventory reduction, expense initiative, reorganization Capital decision Real-estate, capital investments, share repurchase Solid Balance Sheet Solid Free Cash Flow Financial Flexibility 34

35 Fiscal 2009 Financial Expectations GAAP EPS $1.10 $1.25 $0.09 GAAP Gross Margin 50.0% 51.0% 49.1% Adjusted EPS for Warranty Sales $2.35 $2.50 $0.96 Comparable Store Sales -1% Flat (0.7%) Free Cash Flow $145M $155M $50M 35

36 Warranty Sales and Recognition Example through FY12 in millions FY06 FY07 FY08 FY09 FY10 FY11 FY12 36 Warranty Sales Warranty Revenue Recognized

37 Warranty Sales and Recognition Example through FY12 in millions FY06 FY07 FY08 FY09 FY10 FY11 FY12 37 Warranty Sales Warranty Revenue Recognized Deferred Revenue on Balance Sheet

38 Non-GAAP Reconciliation Reconciliation of GAAP Information to Non-GAAP basis for fiscal 2009, diluted: Dollars in millions, except per share amounts 12 months Ended July 31, 2009 Per share Guidance Range Net Earnings from Continuing Operations Change in Deferred Revenue $1.10 $ Net Earnings Adjusted for Total Warranty Sales $2.35 $2.50 Amount Guidance Range New Cash Provided by Operating Activities Payment for Property and Equipment $190 $200 (45) (45) Free Cash Flow $145 $155 38

39 Steve Larkin EVP, Chief Marketing & E-Commerce Officer 2008 Zale Corporation. All Rights Reserved

40 Laying the Foundation Re-engage core customer Operational effectiveness Financial rigor and discipline 40

41 Focus on Core Customer Marketing/Elevating the Brand Emotion Trust Quality Expertise 41

42 Catalogues Fiscal 2008 Cluttered too many items per page Less focus on emotion Price point leads message 42

43 Catalogues Fiscal 2009 Clean Emotion Product is hero, supported by price 43

44 Focus on Core Customer Targeting Personalized offers Versioned catalogues Demographic opportunities Timely promotion intensifying key shopping periods Multi-channel opportunities 44

45 45

46 46 Zales ~ Helping America Say I Love You

47 Holiday 2009 What has changed 2008 Zale Corporation. All Rights Reserved

48 Store Set-up Pre-Holiday Fiscal

49 Store Set-up Holiday Fiscal

50 Catalogues Fiscal

51 Catalogues Fiscal

52 Investor Day September 10, Zale Corporation. All Rights Reserved