By  on August 31, 2007

Despite a slight drop in year-over-year revenue, Zale Corp. swung to a fourth-quarter profit, helped by tax benefits.

For the fourth quarter ending July 31, the Dallas-based jewelry retailer reported a profit of $1.5 million, or 3 cents a diluted share, compared with the year-ago loss of $27.4 million, or 57 cents a diluted share. Excluding one-time items, the company posted breakeven earnings and earnings per share, compared with a profit of 2 cents per diluted share in the year-ago quarter.

Shares of the Dallas-based jewelry retailer were up 8.7 percent on Thursday to close at $22.62.

Fourth-quarter revenue was $488.2 million, a drop of 0.5 percent from $490.7 million in the 2006 period. Analysts expected a loss of 13 cents a share on revenue of $483.2 million.

For fiscal 2007, Zale posted earnings of $59.3 million, or $1.21 a diluted share, up from $53.6 million, or $1.09 a diluted share in the year-ago period. Excluding charges, full-year earnings were $74.4 million, or $1.52 a share.

“Fiscal 2007 was a year in which we focused on going back to the basics,’’ Betsy Burton, chief executive officer, said in a statement. “We tested investments in inventory assortments as well as in payroll and marketing. For fiscal 2008, we expect earnings improvement, a significant reduction in inventory and the continued success of our lifetime jewelry protection plans to generate approximately $125 million to $150 million in free cash flow.”

Full-year revenue came in at $2.44 billion, flat from the previous year. Analysts expected full-year earnings of $1.13 per diluted share on revenue of $2.44 billion.

The company expects fiscal 2008 earnings between $1.11 and $1.16 a share, or between $2.11 and $2.16 a share, including revenue from the sale of lifetime jewelry warranties.

Analysts see full-year earnings of $1.49 a diluted share on revenue of $2.5 billion.

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