Zale veterans are anxiously watching events at the famed retailer, with most saying something’s got to give. (See related story on page 19.)

The current interim CEO, Theo Killion, has a human resources background, and many observers think he’ll likely be replaced. In addition, Gil Hollander, while highly regarded as a supply chain manager, does not have much experience at merchandising or marketing, even though he’s taken over that position. But at press time, some think the company would be more eager to fill the crucial position of chief stores officer, recently vacated by William Acevedo.

While former CEO Neal Goldberg has his defenders and is leaving with a $2 million to $3 million severance package, many Zale observers feel the company has no choice but to go “back to basics” and discard the fashion-oriented approach favored by Goldberg. Goldberg “made Zale into a department store, rather than a jewelry store,” complained one Zale veteran. There were also complaints that he hired too many people from outside the jewelry industry in key positions.

While Goldberg seemed confident in his holiday planning and even scheduled his wedding and honeymoon during the Christmas rush, the company’s holiday sales were disappointing, falling 12 percent, while rival Signet said U.S. holiday sales were up 7 percent.

Meanwhile, there’s a lot of talk over the role of Richard Breeden, the “activist investor” who currently owns 28 percent of the company’s stock and controls two seats on its board. Having bought hundreds of millions of dollars’ worth of Zale stock only to see it fall precipitously, Breeden stands to lose a considerable amount, and observers think he’s looking for a way to minimize his losses.

Vendors, meanwhile, are nervous about Zale’s future, with most shipping to the company only on COD. Zale has been careful to take care of its vendors, with an executive recently telling Women’s Wear Daily it has made “substantial progress on its trade payables.”