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Zale Management Discusses Q4 2012 Results - Earnings Call Transcript

Stocks in this article: ZLC

Now turn to Slide 4. I'm now going to cover our fiscal year 2012 highlights. For the year, we achieved a 6.9% comparable sales increase on top of an 8.1% increase in the prior fiscal year. Our operating earnings for the year were $19 million, a $47 million improvement year-over-year and represented the first annual operating profit since fiscal year 2008. These financial accomplishments are a direct result of disciplined execution of our multiyear strategy. During 2012, we achieved significant progress in every area of that strategy. First, we continued our focus on the merchandise assortment, improving the core by thoughtfully layering in proprietary product. During fiscal 2012, our core product mix improved to over 85%, and we introduced Vera Wang LOVE and Persona, 2 proprietary collections that you can only get at the Diamond Store. Both collections have performed well and have been expanded. We focused on striking the right balance between the value our guest demands and taking price increases. We delivered on this promise by maintaining competitive offerings with opening price points, while managing the impact of commodity cost increases.

Another key area of focus in 2012 was our marketing presence, which was designed to support our merchandising strategies while also elevating our brands. There was no better validation of our marketing than to have 600,000-plus people opting in to view our television commercial montage for YouTube last holiday. And because speaking to guests is no longer a one-dimensional conversation, we expanded our Omni-Channel business model across mobile and social media, web stores and traditional stores to provide access to our products, where and when our guests want it. An important part of that strategy is our web store business. eCommerce sales increased 16% in 2012 and over 40% in the past 2 years. Revenue from eCommerce sales is now about 5% of total revenue, which doesn't adequately represent the true value of the eCommerce guest. We believe that most guests initiate their shopping experience online, researching and comparing what's available before making their purchase in one of our traditional stores.

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