Shares of Zale Corp. rose nearly 6 percent Wednesday after the company reported that its second-quarter profit more than quadrupled on higher net and same-store sales.
For the three months ended Jan. 31, income was $27.2 million, or 73 cents a diluted share, from $6.7 million, or 21 cents, in the year-ago quarter. Revenues rose 7.6 percent to $626.4 million from $582.3 million. Comparable-store sales rose 7.9 percent, compared with the year ago decrease of 11.2 percent.
Matthew Appel, executive vice president and chief financial officer, told Wall Street analysts during a conference call, “The increase in revenues is primarily due to higher same-store sales and [an] increase in revenues recognized on our lifetime warranty programs and appreciation of the Canadian dollar.”
Appel added that the increase in comps was driven by an “increase in both the number of customer transactions and average transaction price.”
He also addressed the subject of commodity prices, noting that since last fall, “diamond producers have experienced a significant increase in the price of rough [diamonds]. We have accepted some modest price increases with more recent receipts. However, based on the well-publicized price pressure in the marketplace, it will be necessary to accept additional selective price increases this spring as we replenish our core inventory.”
He said that the firm is also evaluating its pricing strategy with a focus on maximizing gross margin dollars. “Gold pricing is far less significant to us. However, over the past year gold prices have increased by approximately 24 percent. We have addressed this by shifting more merchandise into alternative metals, for example in [Piercing] Pagoda, and by taking selective price increases.”
Theo Killion, chief executive officer, told analysts that since joining the company a year ago, the firm has worked on fixing the core assortment, and that “78 percent of our inventory is now core…. We have methodically rebuilt the assortment architecture, while simultaneously eliminating unproductive inventory without sacrificing margin.”
For the six months, Zale’s loss widened to $70.7 million, or $2.20 a diluted share, from a loss of $53.1 million, or $1.66, a year ago. Revenues rose 4.6 percent to $953.5 million from $911.5 million.
David Dyer, president and ceo of Chico’s FAS Inc., was added to the company’s board. Before joining Chico’s in 2009, he held top executive posts at Lands’ End, J. Crew and Tommy Hilfiger.
Shares of Zale closed at $4.51, up 25 cents, or 5.9 percent, in New York Stock Exchange trading Wednesday.