Zale Shares Drop on News of SEC Probe

Shares of jewelry retailer Zale Corp. tumbled almost 10% on Monday after the company said the Securities and Exchange Commission had started a probe into its accounting, executive pay and other matters.

The SEC is looking into the company’s accounting for extended service agreements, leases and accrued payroll as well as other matters, Zale said.

The company’s stock slumped $2.64 to $25.16.

The SEC has subpoenaed materials related to the accounting issues as well as to executive pay and severance, earnings forecasts and the timing of certain vendor payments, Zale said.

In January, then-Chief Executive Mary L. Forte received a severance package worth $8.5 million when she resigned under pressure from the Zale board.

Zale operates more than 2,300 stores under names including Zales Jewelers, Bailey Banks & Biddle Fine Jewelers and Piercing Pagoda. Its flagship Zales chain of moderately priced jewelry has struggled with mistakes in merchandise selection and ordering, and it has been hurt by competition from department store companies such as J.C. Penney Co.

Zale, based in the Dallas suburb of Irving, said that it was cooperating with the SEC’s investigation while conducting its own review, and that it believed its accounting “complied with generally accepted accounting principles.”