May 03, 2010
-
News: Citi Gives Zale Second Chance
In December, Citibank announced it would most likely not be renewing its contract with Zale Corp. as its provider of the jeweler's co-branded credit card. It appears things have changed. Last Friday, Zale's Chief Financial Officer, Matt Appel told the press that Citibank has agreed to give the jewelry company an extension to May 31st. The extension is aimed at giving Zale Corp. time to negotiate with Citibank to decide if the company will pay a $6 million credit card sales shortfall penalty. Zale's original contract guarantees Citibank a set amount of credit card sales or pay penalties that compensate for the shortfall.
Zale Corp is one of the U.S. top jewelry store chains and has been struggling along with most retailers due to a weak economy. The two companies will be negotiating the renewal of their co-branded credit card while Zale determines how it will handle the $6 million penalty. Zale's credit cards issued by Citibank account for over 40 percent of the company's U.S. sales. Citi had told Zale back in March that they were considering terminating the card program six months earlier than the March 2011 expiration date if Zale failed to pay the penalty. It was also rumored that Zale was talking with another organization in regards to managing its card business. According to Citibank, with the extension to the end of May, it is the only company in negotiations with Zale Corp.
Zale in Canada is also connected with Citibank who announced last month that it would be ending its credit card business with the jeweler when the contract runs out on June 30th. The company is in negotiations with another financial institution working on managing Canadian sales. The name of the company was not released. However, Appel is more optimistic with its contract covering U.S. sales, but said it was too early to say. Zale Corp. has been working with Peter J. Solomon Co. in hopes of finding new investors that might help turn the company around. Although Zale's sales for the holidays were better than expected, the jeweler continues to lose market share.