Asteria Colored Diamonds

Asteria Colored Diamonds

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Leibish & Co

Thursday, February 24, 2011

Zale Corp. Profit Lauded as a ‘Turning Point’ for the Company


Zale Corp. said Wednesday that its year-over-year net income in the fiscal second quarter rose 400 percent to 27.2 million, compared with $6.7 million for the second quarter of the prior fiscal year.

Revenues for the quarter ended January 31, increased 7.6 percent to $626 million, the Dallas-based jewelry and diamond retailer. Same store sales for the period increased 7.9 percent, compared to a decrease of 11.2 percent during the comparable period in the prior year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, same store sales increased 7 percent for the quarter.

The company achieved gross margin on sales of 50.3 percent for the quarter, compared to 49.8 percent in the comparable quarter last year.

“Our financial performance for the critical second quarter reflects the collaborative efforts of our total organization focusing on one objective – delivering a successful holiday,” said Theo Killion, Zale Corp. CEO. “In doing so, we’ve taken an important step towards our goal of returning to profitability.”

“This quarter marked a turning point for the company as we returned to positive same store sales,” added Matt Appel, Zale Corp. CFO. “We are pleased with the results to date from our turnaround initiatives.”

Selling, general and administrative expenses were $258 million, or 41.2 percent of revenues, in the quarter, compared to $252 million, or 43.3 percent of revenues, in the same period last year. Its operating income for the quarter was $44 million compared to an operating loss of $3 million in the prior year quarter. Operating margin improved $46 million, or 750 basis points, to 7 percebt for the, compared to negative 0.5 period in the same period last year.

The company incurred income tax expense of $6 million for the period, compared to a benefit of $12 million in the comparable period in the prior year.

Inventory as of January 31, stood at $777 million, an increase of approximately $39 million from Jan. 31, 2010, in anticipation of the Valentine’s Day selling period. As of January 31, the company had outstanding debt of $385 million, compared to $368 million as of January 31, 2010.

Zale Corp. is a leading specialty retailer of diamonds and other jewelry products in North America, operating approximately 1,870 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corp.'s brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.

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