Zale Reports Second Quarter Fiscal 2012 Results

Zale Corporation (NYSE: ZLC) today announced its financial results for the second quarter ended January 31, 2012. Revenues for the quarter ended January 31, 2012 were $664 million, an increase of $37 million, or 6.0%, compared to $626 million in the same period last year. Revenues in the second quarter of fiscal 2012 include $12.6 million resulting from the previously disclosed change in warranty revenue recognition.

Comparable store sales, which are based on year-over-year merchandise sales, increased 5.8% during the quarter ended January 31, 2012. This increase follows a 7.9% rise in the same period last year. At constant exchange rates, which exclude the effect of translating Canadian currency denominated sales into U.S. dollars, comparable store sales increased 6.1% for the quarter.

• U.S. Fine Jewelry brands (about 69% of annual revenues), consisting of Zales Jewelers, Zales Outlet and Gordon’s Jewelers, had an increase in comparable store sales of 8.9%. This increase follows a 7.6% rise in the same period last year.
• Canadian Fine Jewelry brands (about 17% of annual revenues), consisting of Peoples Jewellers and Mappins Jewellers, had an increase in comparable store sales of 0.7%. This increase follows a 13.3% rise in the same period last year. At constant exchange rates, Canadian Fine Jewelry brands comparable store sales increased 2.3%, compared to an increase of 8.0% in the prior year period.
• Kiosk Jewelry (about 14% of annual revenues) comparable store sales decreased 3.0%. In the same period last year, Kiosk Jewelry comparable store sales rose 2.7%.

For the quarter ended January 31, 2012, gross margin was $336 million, or 50.5%, an increase of 6.5% compared to $315 million, or 50.3%, in the same period last year. Selling, general and administrative expenses were $282 million, or 42.5% of revenues, in the quarter ended January 31, 2012, compared to $258 million, or 41.2% of revenues, in the same period last year. The increase was primarily driven by the holiday advertising campaign, including marketing for the launch of proprietary products. The Company’s operating earnings for the quarter were $43 million, or 6.5% of revenues, compared to operating earnings of $44 million, or 7.0% of revenues, in the prior year quarter.