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Holiday Season Lifts Zale Profits

New merchandising initiatives and marketing programs help jeweler.

Strong holiday sales and new merchandising initiatives helped lift Zale Corp.’s second-quarter income 6 percent, giving the jeweler some momentum to continue its turnaround. 

Hit hard by the recession, Zale has revamped its assortment, adding proprietary collections from Vera Wang and Jessica Simpson and expanding its Persona bead collection.

Those initiatives, as well as a rejuvenated marketing strategy, helped the company meet analysts’ quarterly earnings expectations and post income of $28.8 million, or 77 cents a diluted share, for the quarter ended Jan. 31. This compared with year-ago income of $27.2 million, or 73 cents a share.

The company’s quarterly sales rose 6 percent to $663.8 million, from sales of $626.4 million, a year earlier.

Comparable-store sales expanded 5.8 percent, or 6.1 percent, excluding the effects of currency translation.

The Dallas-based firm’s U.S. fine jewelry brands, which make up about 69 percent of annual revenue and consist of Zales jewelers, Zales Outlet and Gordon’s Jewelers, experienced an 8.9 percent increase in comps.

Canadian fine jewelry brands, which equal about 17 percent of revenue and consist of Peoples Jewellers and Mappins jewellers, had a 0.7 percent rise in comps, or a 2.3 percent comp gain at constant exchange rates.

However, comps at kiosk jewelry, which accounts for 14 percent of annual sales, slid 3 percent.

“The journey that we’ve been on has been characterized by discipline and focus, sticking to our plan, and executing against it,” said chief executive officer Theo Killion. “Even with the challenges in the North American economy and pressure from commodity cost increases, we continue to build business momentum.”

For the six months, the jeweler narrowed its net loss to $3 million, or 9 cents a share, from a loss of $70.7 million, or $2.20 a share, a year ago, when results were pulled down by a special charge. Sales for the period increased 6.4 percent to $1 billion, from $953.5 million.

Shares of the firm were up 4.4 percent to $3.54 in midday trading.