Zale Wants Vendors to Buy Back Jewelry for Cash, WSJ Reports

Diamond traders are sometimes willing to take back diamonds from retailers, but in return for credit, not cash

Embattled diamond jewelry retailer Zale is asking its jewelry suppliers, diamond traders and other vendors to buy back old jewelry for cash, the Wall Street Journal reported Wednesday. Zale is requesting that in return for a pledge for future orders suppliers buy back jewelry, including items they did not manufacture.

WSJ is citing a company document and interviews with people familiar with the matter.

The WSJ obtained an email written last month by Gil Hollander, Zale's chief merchandising officer, to a Zale supplier.

"We are looking to trade inventory (mostly diamond fashion), at our full cost, with an agreement to purchase 2x's that amount over the next year," Hollander said in the e-mail.

Zale wants vendors to write a check for what Zale originally spent on the jewelry, according to two vendors approached by the retailer. Several vendors said they are reluctant to agree to the proposal, the newspaper added.

An Israeli diamond trader that supplies Zale told IDEX Online that he was not approached by the retailer, but cautioned against the move. “They want me to write a check for $1 million and promise to buy back for $2 million within a year? Who guarantees that they won’t go bankrupt in six months?”

The trader told IDEX Online that Zale has most likely accumulated a large stock of low quality items that no one at this stage would be interested in buying back. “Maybe, if they issue a bank note or offer a bank’s guarantee, it would be worth considering,” he added.

Zale’s’ top executive team, including former CEO Neal Goldberg, recently left the company after it posted sales losses for the 2009 holiday season.

“To preserve funds, Zale has canceled much of the advertising it had planned for Valentine's Day as well as Mother's Day,” according to the WSJ.

The company was not immediately available to comment.