Citibank to Exit Zale Credit Card Deal in 2011

A rocky holiday season turned even more grim as Citigroup Inc. officials advised Zale Corp. to find another servicing bank for its consumer credit card portfolio. Citibank has provided the private label credit card financing for holders of Zale's "Diamond Card" since 2001. However, mounting concerns about the jewelry retailer's fiscal health prompted Citi to decline to renew their agreement.

Zale Corp. operates some of the best-known jewelry brands in the United States, including Zales and Gordon's Jewelers. Company officials told reporters that they felt confident a new private label credit card agreement would be reached soon, either with Citi or with a competing card issuer. Same-store sales for the company dropped nearly 20% in November, typically the company's strongest month.

Although the move has caused concern on Wall Street, Zales shoppers should experience little to no disruption in service. Citi's credit card unit provides financing directly to diamond and jewelry shoppers. Termination of the agreement could result in credit lines being frozen to existing customers after 2011, unless a new private label credit card issuer purchases the Zale portfolio.