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5 Gift Cards to Avoid for Holiday Shopping

Zales (ZLC)
Tiffany and Co. (TIF - Get Report) weathered the recession by beefing up its downmarket options and Signet (SIG - Get Report) cut margins so "he" could still go to Jared and every kiss could begin with Kay. Zales? Not so much.

Zales sales for fiscal 2011 were up by $125 million over past year, while comparable store sales were up 8.1%, That's a dramatic improvement from last year's 6.6% downtick same-store sales, but not even its Jessica Simpson diamond jewelry line could prevent it from adding nearly $20 million to its net loss during the same period. About the best thing Chief Executive Theo Killion could say about it was "we made substantial progress in the multiyear initiative to return to profitability."

Unfortunately, that progress involved trimming nearly 300 stores from its stable within the last three years Within the past six, its stock price has plunged 88%, from $24 a share to less than $3.50. Meanwhile, upstart online-only competitor Blue Nile (NILE - Get Report) has eaten up market share and quadrupled Zales' market cap.

In retail's cluttered jewelry box, Zales has made it increasingly obvious that it's the odd piece. The mall jeweler seems content to sell its wares as if its buyers are still wearing Z. Cavaricci pants and B.U.M. Equipment shirts and has missed out on the success its competing jewelers are experiencing beyond the food court.

If Zales can't turn it around, its holiday gift cards will have about as much value as Chess King and Suncoast Video gift certificates.

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