On Mar 1, 2014, Zacks Investment Research upgraded
), the specialty retailer of fine jewelry, to a Zacks Rank #1
Why the Upgrade?
The company has been witnessing rising earnings estimates since
it released its second quarter fiscal 2014 earnings results,
where on the back of strong sales from Zale branded stores and
People branded stores, its earnings surged 10.8% to $1.13 a
share, cruising ahead of the Zacks Consensus Estimate of $1.04.
Moreover, the company delivered a 1.9% rise in comparable store
sales with the gross and operating margins expanding 240 and 150
basis points (bps) to 53% and 9.1%, respectively. Margins
primarily benefitted from Zale's strong promotional initiatives
throughout the holiday period, its effective cost management and
its sourcing methods.
Additionally, the stock has been gaining momentum owing to its
latest agreement with
Signet Jewelers Ltd
), as per which, Signet will acquire all of Zale's outstanding
shares at $21 each by cash. The acquisition would result in
combined sales of $6.2 billion generating from approximately
3,600 retail outlets and annual synergies of roughly $100 million
within the three fiscal years, resulting from operational
The transaction is valued at $1.4 billion and has also received a
nod from Golden Gate Capital, holding 22% stake in Zale. The deal
is anticipated to be accretive to earnings in the high
single-digit percentage in the first full fiscal year after the
transaction is concluded.
As the jewelry market in the U.S. is still recovering from the
recession, the news of Zale's timely buyout by Signet has brought
optimism into the environment. This has triggered an uptrend in
the Zacks Consensus Estimates, as analysts became more
constructive on the stock's future performance. This is evident
from the movement witnessed in the Zacks Consensus Estimate that
jumped 12% to 56 cents for 2014 and 4.2% to 75 cents per share
for 2015 in the past 30 days.
Other Stocks to Consider
Other top-ranked stocks worth considering in the retail space
Advance Auto Parts Inc.
Christopher & Banks Corporation
), both sporting a Zacks Rank #1(Strong Buy).
ADVANCE AUTO PT (AAP): Free Stock Analysis
CHRISTOPHER&BNK (CBK): Free Stock Analysis
SIGNET JEWELERS (SIG): Free Stock Analysis
ZALE CORP NEW (ZLC): Free Stock Analysis
To read this article on Zacks.com click here.