By  on August 31, 2005

NEW YORK — Jewelry retailer Zale Corp. said fourth-quarter net income fell 41.2 percent, while earnings in the full year came in relatively flat.

Though optimistic on its current repositioning strategy, the company said it plans to close 30 to 35 underperforming Bailey Banks & Biddle stores after the upcoming holiday season.

During the three months ended July 31, Zale earned $4.1 million, or 8 cents a share, matching analysts' projections. Comparatively, earnings were $6.9 million, or 13 cents, in the year-earlier period. Revenues in the quarter were $472.3 million, up 3.7 percent.

In the full year, Zale earned $106.7 million, or $2.05 a diluted share, compared with $106.5 million, or $1.99, in the prior year. Diluted common shares outstanding totaled 51,975 at the end of 2004, compared with 53,519 at the end of 2003.

The firm had total annual revenues of $2.4 billion, an increase of 3.4 percent, while same-store sales rose 0.3 percent.

"The increases to sales and earnings in fiscal 2005 did not meet our expectations, particularly due to the underperformance of the Zales brand and its impact on our consolidated results. With many new initiatives being implemented at Zales, significant repositioning of the brand has taken place," said Mary L. Forte, president and chief executive officer of Zale, in a Tuesday statement.

In the fiscal year ending July 31, Zale said earnings per share are expected to rise 5 to 7 percent, including $13 million, or 25 cents a share, in charges from the closures of Bailey Banks & Biddle stores, a $5 million, or 10 cents a share, stock compensation expense and a $10 million earnings gain from its Canadian operations. Excluding those items, EPS is seen rising 12 to 14 percent.

Total fiscal 2006 revenues are seen up 5 to 7 percent with same-store sales up 2.5 to 3.5 percent.

Analysts have forecast EPS of $2.36 on revenues of $2.51 billion in fiscal 2006.

In addition, Dallas-based Zale said it expects to open 65 new stores and 40 kiosks in fiscal 2006.

Investors seemed happy with the company's 2006 expectations and sent its shares up 2.4 percent in Tuesday trading to $28.74.Separately, Zale said its board has approved a $100 million stock buyback program.

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