RAPAPORT...  Zale Corporation profits for second quarter fell 32 percent to $52.7 million (or $1.16 per diluted share.) The quarter ended January 31, 2008, and revenue slipped 7 percent to $828 million.

Zale's new president and CEO, Neal Goldberg, said that while results were disappointing... “We intend to make Zale into a more nimble and efficient organization. We remain focused on the generation of free cash flow, achieving a high return on capital and maintaining financial rigor and discipline overall."

Zale will reduce $100 million in excess inventory, but these goods would be sold at profit, Goldberg said.

Through fiscal 2008 Zale expects  a negative impact on gross margin of approximately 500 basis points which is expected to be more than offset by the positive impact of the inventory reduction on free cash flow.

"Although we plan to make some selective investments, this $100 million reduction is not intended to be replenished," Goldberg said. "These actions are designed to ensure Zale’s success and generate value for shareholders over the long-term,” he said.

Zale retired 5.8 million shares during the second quarter and anticipate retiring approximately 11 million shares in total once share repurchase program is completed.