Zale Corporation (NYSE:ZLC), a leading specialty retailer of fine jewelry in North America, today reported that for the third quarter ended April 30, 2008, comparable store sales increased 5.8%. Revenues for the third quarter were $477 million compared to $449 million last year, an increase of 6.3%. As previously announced, the sale of Bailey Banks & Biddle was completed on November 9, 2007 and has been excluded from the results for both the current and comparable periods.
Year-to-date revenues decreased 2.4% to $1.68 billion, compared to $1.72 billion for the same period last year. Year-to-date comparable store sales decreased 2.3%.
Unrecognized revenues related to warranty sales increased $17 million for the third quarter. Year-to-date, unrecognized revenues increased $64 million. This increase reflects the incremental cash collected and the future positive impact to earnings as a result of the previously announced change to the Company’s lifetime jewelry protection plans.
Neal Goldberg, President and Chief Executive Officer commented, “We have a focused agenda to improve execution, and these sales results reflect the early success of our plan. Sales were fueled primarily by an aggressive clearance strategy that exceeded our expectations with $55 million of inventory liquidated in the third quarter. This clearance strategy is critical for us to achieve our goal of becoming clearer in our product offering and more effective in differentiating the good, better, best value proposition. Going forward, we will remain aggressive with the promotional activity as we work toward permanently reducing inventory by $100 plus million. We are pleased with the early signs from our new merchandising initiatives, and the positive momentum from our inventory reduction creates additional flexibility in positioning the business for fiscal 2009.”
The Company expects earnings per share from continuing operations to be in the range of ($0.40) to ($0.45) for the third quarter ended April 30, 2008. The Company further stated that while the clearance strategy did drive sales in the third quarter, it had the expected corresponding impact on gross margins and the variable expense lines. As the Company completes the inventory reduction, it expects promotional activity to intensify creating additional gross margin compression in the fourth quarter.
Zale Corporation will announce its third quarter 2008 earnings results on May 22, 2008. A conference call will be held at 9:00 a.m. EST. Parties interested in participating should dial 706-643-7467 five minutes prior to the scheduled start time.
