Zale Names Killion CEO, Inks U.S. Credit Agreement

(IDEX Online News) - Zale Corporation named Theo Killion CEO and a member of the board, effective immediately. Killion has served as President and Interim CEO since January 13, when Neal Goldberg resigned. The jewelry retailer also announced a five-year private label credit card program with Citi, to replace the existing agreement.

Killion joined Zale in January 2008 as executive vice president and was appointed president in August of that year. Previously, he held senior management positions at Tommy Hilfiger, Limited Brands, Macy's East and the Home Shopping Network.

Zale announced a number of changes to its board. Kenneth B. Gilman, a retail industry veteran, has joined as an independent director. Richard C. Breeden and James M. Cotter have resigned from the board having served since January 2008.

After long months of trying to resolve its private label credit card program issues, Zale found a partial solution, saying that Citibank (South Dakota), N.A. will continue the program for the retailer’s Zales, Zales Outlet and Gordon’s brands in the U.S. This leaves the company to workout a solution for its Canadian operations.

The five-year agreement will automatically renew for successive two-year terms and replaces the company’s agreement with Citi which was scheduled to expire in March 2011.

Citi provided Zale customers with financing to purchase merchandise in about 40 percent of purchases in the U.S. and 25 percent of purchases in Canada.

Payment of the merchant fee differential that was due last Wednesday has been waived. Under the new agreement, the yearly minimum volume of net credit card sales has been reduced from $600 million to $315 million. Additionally, Citi will provide financial support of the Company’s marketing activities during the initial five-year term of the contract.

In August, Zale received a fourth termination notice under its agreement with Citibank. The deal between Zale and Citibank dictated that the volume of private-label credit card sales must meet the agreed-upon levels. If they do not, Citibank is entitled to terminate the retailer's private-label program with 180 days' notice unless Zale is able to compensate Citibank for the minimum volume shortfall. To date, Zale paid nearly $5 million in compensations.