Goldman Sachs Lowers Zale Rating to ‘Sell’

Three weeks after Zale announced a further drop in revenues and an organizational shakeup, Goldman Sachs analyst Adrianne Shapira lowered on Tuesday her rating for the company from ‘Neutral’ to ‘Sell’. Zale’s shares dropped from 21.04 to 19.89 during the day, a new 52-week low, closing at 20.36, a 7.54 percent decline.

Shapira said management upheaval and poor strategic positioning, coupled with wider economic woes, are likely to continue harming the jewelry retailer’s bottom line.

Zale reported a fourth quarter comparable store sales decrease of 0.5 percent, bringing down fiscal comparable store sales 0.2 percent. Quarterly revenues slumped 0.6 percent to $488 million and annual revenue was flat at $2.44 billion.

On August 6 Zale CEO Betsy Burton announced a series of organizational and personnel changes at the company, including the creation of a centralized merchandising organization. John Zimmermann, president of Zale North America has left the company.

“The replacement of a key executive such as Mr. Zimmerman ahead of the holiday [season] could, once again, result in internal turmoil,” Shapira wrote.

Shapira’s forecast for Zale’s fiscal 2008 profit is between $1.01 and $1.10 per share.