Who could predict that getting a new credit line and reworking other debts to save interest could work wonders to this extent? That is precisely what happened with jewelry chain Zale Corporation(NYSE:ZLC) when their shares climbed to astronomical heights. According to latest reports, sales are increasing tremendously! The company faced dark days during recession when shoppers had put a lid on discretionary spending. The main reasons for Zale’s revenue coming down drastically were the higher rate of unemployment and tighter credit during recession.
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Gordon's Jewelers, Piercing Pagoda and Zales Jewelers are some of the brands that fall under Zale and it has about 1,790 stores in the U.S., Canada and Puerto Rico. The Dallas-based firm declared on Tuesday that it has secured a $665 million credit facility and prepaid $60.5 million on a senior secured term loan. It rectified and extended a senior secured term loan with Golden Gate Capital for the $80 million that remained on it.
It is anticipated that the aforementioned moves will amount to around 17 million dollars in annual savings, when calculated according to current interest rates. This lowers its total average borrowing cost to around 4% from 8%. The stock went up to 59 cents, or 23%, to $3.16 on Wednesday.
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Due to the recession, Zale had to shut down numerous stores in the last few years and made changes in its top management as well. In its fiscal second quarter, the company saw better days thanks to the holiday shopping season, when their profits soared to 6%, but they incurred heavy losses after that, which came up to 4.5 million.
CEO Theo Killion confirmed on Wednesday that a crucial revenue parameter has consistently climbed for the last 6 quarters. Chief Financial Officer Thomas Haubenstricker said that the refinancing will be a boon for the firm granting it flexibility that will enable fourth-quarter revenue at stores open for a year to go up to 8%. The figure will soar to 7% for the full year according to them.