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Zale's 4Q Sales +9%, Net Loss Rises to $33M

Same-Store Sales Improve

Aug 31, 2011 7:56 AM   By Jeff Miller
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RAPAPORT... Zale's fourth-quarter sales rose 9.4 percent year on year to $377.3 million for the three months that ended on July 31, 2011. Same-store sales rose 9.8 percent and at a constant exchange rate with Canada, comparable-store sales rose 8.5 percent.  Zale reported a net loss of $32.6 million, which was up from $28.5 million one year ago, and that translated into a net loss per share of $1.02.

Cost of sales during the quarter rose 12.6 percent to $183.8 million and gross margin as a percentage of revenue declined to 51.3 percent from 52.7 percent one year ago. Excluding "last-in, first-out"  (LIFO) inventory charges of $7.9 million, gross margin would have been 53.4 percent, Zale explained.  The retailer contended that a $5 million increase in LIFO charges were primarily attributable to rising diamond, gold and silver commodity costs.

Inventory on July 31 was recorded at $721 million, which was up from $703 million one year ago. Zale held outstanding debt of $395 million, compared with $296 million on July 31, 2010.

Zale closed out its fiscal year 2011 with revenue of $1.74 billion, a year-on-year increase of 7.9 percent, whereas cost of sales grew only 7.5 percent to $862.5 million and Zale maintained a gross margin of 50.5 percent for the fiscal year.  However, Zale reported a 20 percent increase in its net loss at $112.3 million or $3.50 per share. 

Same-store sales rose 8.1 percent for the fiscal year, but the figure was 7.1 percent when factoring in constant exchange rates with Canada.  Zale  recorded income tax expense of $2 million, compared with a tax benefit of $29 million in fiscal 2010.

''In fiscal 2011, we made substantial progress in the multi-year initiative to return to profitability,'' said Theo Killion, Zale's chief executive. ''The strength of our assortment, marketing and field organization position us well to navigate through the current economic environment.''

Matt Appel, Zale's chief financial officer, noted that the fourth quarter was the third consecutive quarter of  positive same-store sales. ''Despite the headwinds imposed by volatility in commodity markets and the overall economy, our gross margin performance in the quarter and full year reflects the traction we are gaining in the marketplace,” Appel stated.

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Tags: Economy, Jeff Miller, net loss, plunge, quarter, results, shares, Zale
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