1. Zale Corp.

Year-to-date Total Return (as of Dec. 12): 258.39%

Price-to-earnings ratio: 210.43

Market Cap: $484 million

Zale Corp. (ZLC), owner of a handful of jewelry brands, its namesake business Zale's the largest, is also up against strong competition namely Tiffany (TIF) and Signet Jewelers (SIG), owner of the popular Jared The Galleria of Jewelry and Kay Jewelers brands.

Zale's, with nearly 1,700 total stores across its platform, is primarily a mall-based jewelry retailer. The Dallas-based company said in its latest earnings report on Nov. 26 that sales rose 1.4% to $363 million in its fiscal first quarter. Sales comps of its two core brands, were 4.4% (5.4% on a constant exchange rate), driven by comp gains of 7.5% at Zale's and 3.1% at Peoples branded stores (8.5% comp growth in constant currency). Gross margin improved 20 basis points to 53.4% compared to a year earlier, the company said.

Even though, the Dallas-based company reported a net loss of $27 million, or 83 cents a share, it was slightly better than the 86-cent loss analysts were expecting.

The company has been working to improve margins and differentiate itself from the rest of the jewelry retailer pack.

Zale CEO Theo Killion said in the company's earnings statement Zale's is ready for the holiday season by expanding exclusive, branded product offerings, launching a new marketing campaign and improving customer experience.

"Zale will be increasing rollouts of key exclusive jewelry lines this holiday to differentiate itself from the competition," Bank of America Merrill Lynch analyst Lorraine Hutchinson wrote in a Nov. 26 note. Hutchinson has a "buy" rating on the stock.

"The company has expanded the Vera Wang LOVE collection to most of the store fleet, and is also testing new iterations of this successful brand. Zale has increased the penetration of its Celebration Diamond collection across different price points. Lastly, the company has added more color options to its Candy Colored Diamonds and began testing an exclusive fashion collection called The Heart Within in 300 stores, the note says. "We think these expanded exclusive offerings will help Zale garner further brand loyalty and set it apart from smaller competitors."

Hutchinson adds that there is opportunity for further margin expansion as Zale's gets further into its sourcing initiative with AT Kearney.

"We expect a more substantial benefit from the initiative over the next few quarters as less expensive inventory flows more quickly during peak periods," the note says. "The company is also working on Phase 2 of its sourcing program, which could include bringing some assembly in-house to lower Zale's reliance on higher-cost finished goods purchases."

Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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