NEW YORK — Special items depressed Zale Corp.’s quarterly earnings, but soft sales threw Whitehall Jewelers for a loss in its most recent earnings report.
Additionally, Whitehall disclosed in a regulatory filing that it is one of 14 defendants in a $30 million lawsuit filed last month by Capital Factors alleging racketeering and fraud.
For the fourth quarter ended July 31, Dallas-based Zale saw net income fall by almost a fifth, or 19.7 percent, to $2.9 million, or 9 cents a diluted share, from $3.7 million, or 11 cents, last year.
However, excluding a host of unusual items in both years, profits increased 31.4 percent to $6.7 million, or 21 cents, which beat the Wall Street forecast by 1 cent.
Total revenues for the period picked up 1.6 percent to $442.4 million, and comparable-store sales grew fractionally, or 0.8 percent.
“We used our marketing and merchandising strengths to reach our customers and provide them with appealing assortments at terrific values,” said chief executive officer Mary Forte in a statement. “This, combined with staying flexible in our approach to the business and making the necessary adjustments in a difficult operating environment, enabled us to deliver revenue growth and a solid return on investment.”
In a separate development, Zale said it is reentering the jewelry manufacturing business, producing a line of diamond-studded earrings, pendants and solitaire engagement rings that will bow in Canadian stores next month. Company-made jewelry will then be introduced in the U.S. next spring. Zale last manufactured its own jewelry about a decade ago. The strategy is designed to boost operating income.
For the full fiscal year, Zale fell into the red, registering a net loss of $40.6 million, or $1.26, versus last year’s profits of $143.9 million, or $4.13. Excluding special items in both years, Zale would have reported profits of $99.4 million, or $3.08, a 2.5 percent decline from the prior year’s earnings.
Whitehall’s woes continued in the second quarter as the Chicago-based retailer reported a net loss of $2.9 million, or 20 cents, compared with last year’s earnings of $114,000, or 1 cent. Earnings per share matched the Wall Street consensus estimate.
Sales for the quarter ended July 31 declined 4.6 percent to $72.7 million from $76.2 million a year ago.
“While we are disappointed with second-quarter results, we continue to believe that the sales-focused initiatives we are implementing this year will result in [an] incremental sales [increase] by the important Christmas holiday season,” said chief executive officer Hugh Patinkin in a statement. “Indeed, sales results in August have shown an improvement over the first half of the year and our comp-store sales are positive.”
In a Form 8-K filed with the Securities and Exchange Commission last month, Whitehall identified itself as one of 14 defendants in a $30 million lawsuit filed by Capital in a Manhattan federal district court. Capital provided financing to fellow defendant Cosmopolitan Gem Corp. Whitehall said in the filing the lawsuit alleged “Cosmopolitan defrauded Capital into advancing funds” and the other defendants, including Whitehall, “aided and abetted or participated in the alleged fraud.” Whitehall said it “intends to defend the lawsuit vigorously.”
For the first half of the fiscal year, Whitehall recorded a net loss of $5.6 million, or 40 cents. By comparison, last year the firm had earnings of $483,000, or 3 cents. Sales for the six months fell 5.6 percent to $141.9 million from $150.8 million a year ago.