Citigroup Inc.'s renewed private-label card partnership with Zale Corp. requires the jewelry retailer to meet significantly lower credit card sales volumes.
Under the new five-year agreement, Citi can cancel the agreement if the Irving, Texas, company fails to maintain $315 million in annual net credit sales, Zale said Friday. The agreement also allows Citi to end the arrangement if Zale's net card sales decrease by 20% or more during a 12-month period.
Zale's previous agreement with Citi, which was set to expire in March 2011, required the retailer to maintain $600 million in annual net credit sales.
The new agreement also requires Zale to pay Citi a merchant fee on all transactions.
Citi planned to terminate its previous agreement because the retailer had failed to meet required credit sales volumes, according to the retailer's filings with the Securities and Exchange Commission.
Zale made several payments to Citi this summer to extend the previous agreement. In filings, the retailer said its inability to replace the deal with Citi would hurt its ability to continue operating; customers use the private-label financing for 40% of U.S. purchases.
The new agreement takes effect Oct. 1 and includes automatic renewals for successive two-year terms. The agreement provides financing for the retailer's Zales, Zales Outlet and Gordon's brands.