Broad economic factors such as rising fuel costs and internal changes contributed to a third-quarter loss at Zale Corp. Tuesday.
The jewelry retailer posted an expected third-quarter loss of $3.1 million, or a loss of 6 cents a diluted share, for the period ended April 30, which compared with earnings for the same period last year of $16.8 million, or 35 cents a diluted share.
Sales during the quarter dropped 2.8 percent to $511.9 million from $526.9 million in the prior-year period. The company also reported a same-store sales decline for the third quarter of 3.4 percent.
According to a company statement, Zale attributed the results to a number of factors including macroeconomic trends and a company shift to a lifetime jewelry protection plan.
“While comp-store sales decreased 3.4 percent, a focus on maximizing gross margin dollars and good expense control contributed to earnings in line with expectations for the quarter,” said chief executive officer Betsy Burton in a statement. “We believe retail in general is showing signs of weakness, and higher gas prices have directly impacted the discretionary income of the moderate customer. Given these overall macro trends, we are lowering our sales projections, and while cautious, we are maintaining our current earnings guidance for fourth quarter.”
Zale forecast a decline in earnings per share for the fourth quarter between 11 cents and 15 cents a share. The company also projected a comps decline of 2 to 3 percent for its last quarter of the fiscal year.
This story first appeared in the May 23, 2007 issue of WWD. Subscribe Today.