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Zale, Kay Jewelers, and Jared Just Got More Interchangeable

Zale, Kay Jewelers, and Jared Just Got More Interchangeable

Photograph by Daniel Acker/Bloomberg

The $1.4 billion deal for Zale (ZLC)—home of the Diamond Store—adds a bit of consolidation to a retail sector still dominated by local jewelers.

Zale’s buyer, Signet Jewelers (SIG), is the largest U.S. specialty jewelry company. It owns Kay Jewelers and Jared, the Galleria of Jewelry; even so, it commands less than 10 percent of the market. Upper-end Tiffany (TIF) holds about 5 percent, says David Wu, an analyst with Telsey Advisory Group. Blue Nile (NILE), the leader in online jewelry sales, has a market share of about 1 percent.

Part of the reason Signet has gained the top spot in this fragmented field is its ubiquitous national television advertising. “Every kiss begins with Kay,” but the marketing campaign starts with the cash generated by the company’s in-house financing arm. Signet provides financing for more than half the purchases in its stores, says Wu. “It’s a high-margin business … so it allows them to spend the most on marketing. That’s really the key to their success.”

For all you dudes who know nothing, here’s a primer on the triplets of middle-market jewelry: Jared is the much smaller, higher-end, off-mall retailer that targets a relatively wealthier clientele, those earning $50,000-$150,000 per year. Kay and Zale price more for those earning $35,000-$100,000 per year and favor mall-based locations. Jared also does more watch business than the other two, with mostly upscale brands such as Omega and TAG Heuer. Kay has an average ticket sales price of a bit more than $300, around the same level as Zale, while at Jared the average tops $700.

Dallas-based Zale—the corporate name has no S—is seeing positive results from a lengthy restructuring and turned a $10 million net profit last year after three years of losses, further helping its attractiveness to a suitor. Zale has closed more than 200 stores in the past three years to help improve its results. It has seen strong sales of its branded Vera Wang Love engagement ring line and is planning to diversify into other proprietary lines, which generally offer heftier profit margins. Zale, which will remain a separate brand under Signet, plans to boost its exclusive branded merchandise to one-fifth of sales, from 11 percent last year.

Signet shares soared 17 percent today on news of the deal, atop a 47 percent increase in the past 12 months. Zale gained 40 percent in morning trading.

Bachman is an associate editor for

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