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RAPAPORT... Zale Corporation reported that revenue rose 7.9 percent year on year to $407 million during the fourth fiscal quarter that ended on July 31. Same-store sales rose 8.3 percent. Cost of sales increased 7.2 percent to $197.1 million and gross margin improved to 51.6 percent from 51.3 percent. Nonetheless, Zale still reported a loss of $19.7 million compared with a loss of $32.6 million one year ago.
U.S. brands, consisting of Zales Jewelers, Zales Outlet and Gordon’s Jewelers, experienced a comparable-store-sales increase of 11.2 percent. In Canada, same-store sales at Peoples Jewellers and Mappins Jewellers rose 2 percent; however, at constant-exchange-rates, these figures rose 7.1 percent. Zale's interest expense in the fourth-quarter was $15 million, up from $9 million one year ago. Zale recorded a debt refinancing charge of $5 million . Fiscal-year sales improved 7.1 percent year on year to $1.87 billion and cost of sales rose 5 percent to $905.6 million. Comparable-store sales were up 6.9 percent company-wide. Gross margin rose to 51.5 percent from 50.5 percent and Zale narrowed its loss to $27.3 million from $112.3 million. Long term debt rose 14 percent to $452.9 million. The value of inventory as of July 31 stood at $742 million compared with $721 million one year ago. Theo Killion, Zale's chief executive, said, “In the fourth quarter, we made significant progress in returning Zale to profitability. We recorded our seventh consecutive quarter of positive comps, reported a sizable improvement in operating margin and strengthened our capital structure.” Zale has secured a new $665 million credit facility, which includes an amended and extended $650 million revolving credit facility and a new $15 million first-in, last-out credit facility. The retailer funded a prepayment of $60.5 million on its senior secured term loan and amended and extended its term loan with Golden Gate Capital for the remaining $80 million. As a result of these transactions, at current interest rates, the company’s overall average borrowing cost was reduced from about 8 percent to about 4 percent, resulting in projected annual pretax savings in fiscal year 2013 of approximately $17 million.
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