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Zale Corporation Reports First Quarter Fiscal 2013 Results

Interest expense was $6 million, compared to $10 million in the first quarter of fiscal 2012. The decrease is the result of the debt refinancing completed in July 2012.

Net loss was $28 million, or $0.88 per share, compared to a net loss of $32 million, or $0.99 per share, in the first quarter of fiscal 2012.

Inventory at October 31, 2012 stood at $908 million, compared to $857 million in the same period last year.

Fiscal Year 2013 Outlook

As previously announced, the company expects to achieve positive net income for fiscal year 2013.

Conference Call

Zale management will host a conference call today at 5:00 p.m. ET to discuss first quarter fiscal 2013 results. The conference call will be broadcast live over the internet and can be accessed, along with a slide presentation, on the Investor Relations section of the company’s web site at www.zalecorp.com. In addition, you can listen to the call live by dialing 877-545-6744 (within the United States) or 706-634-1959 (for international callers), passcode 63803917. The webcast will be archived shortly after the conference call concludes and will be available on the company’s web site. For additional information, contact Investor Relations at 972-580-4391.

About Zale Corporation

Zale Corporation is a leading specialty retailer of diamonds and other jewelry products in North America, operating approximately 1,770 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Zale also operates online at www.zales.com, www.zalesoutlet.com, www.gordonsjewelers.com, www.peoplesjewellers.com and www.pagoda.com. Additional information on Zale Corporation and its brands is available at www.zalecorp.com.

This release and related presentations contain forward-looking statements, including statements regarding future sales, expected operating performance, expenses, margins, profitability, interest expense, and effective tax rate. Forward-looking statements are not guarantees of future performance and a variety of factors could cause the Company's actual results to differ materially from the results expressed in the forward-looking statements. These factors include, but are not limited to: if the general economy continues to perform poorly, discretionary spending on goods that are, or are perceived to be, “luxuries” may decrease; the concentration of a substantial portion of the Company’s sales in three, relatively brief selling seasons means that the Company’s performance is more susceptible to disruptions; most of the Company’s sales are of products that include diamonds, precious metals and other commodities, and fluctuations in the availability and pricing of commodities could impact the Company’s ability to obtain and produce products at favorable prices; the Company’s sales are dependent upon mall traffic; the Company operates in a highly competitive industry; the financing market remains difficult, and if we are unable to meet the financial commitments in our current financing arrangements it will be difficult to replace or restructure these arrangements; and changes in regulatory requirements may increase the cost or adversely affect the Company’s operations and its ability to provide consumer credit and write credit insurance. For other factors, see the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended July 31, 2012, and subsequent reports on Forms 10-Q and 8-K. The Company disclaims any obligation to update or revise publicly or otherwise any forward-looking statements to reflect subsequent events, new information or future circumstances, except as required by law.

   
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
October 31,
2012 2011
 
Revenues $ 357,468 $ 350,983
Cost of sales   167,133     163,309  
Gross margin 190,335 187,674
% of Revenue 53.2 % 53.5 %
 
Selling, general and administrative 206,239 199,775
% of Revenue 57.7 % 56.9 %
Depreciation and amortization 8,872 9,888
Other (gains) charges   (1,773 )   498  
Operating loss (23,003 ) (22,487 )
% of Revenue -6.4 % -6.4 %
Interest expense   5,842     9,930  
Loss before income taxes (28,845 ) (32,417 )
Income tax benefit   (580 )   (697 )
Loss from continuing operations (28,265 ) (31,720 )
Loss from discontinued operations, net of taxes   -     (154 )
Net loss $ (28,265 ) $ (31,874 )
 
Basic and Diluted net loss per common share:
Loss from continuing operations $ (0.88 ) $ (0.99 )
Loss from discontinued operations   -     -  
Net loss per share $ (0.88 ) $ (0.99 )
 
Weighted average number of common shares outstanding:
Basic 32,298 32,162
Diluted 32,298 32,162
 

 
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
   
 
October 31,
2012 2011
 
ASSETS
Current Assets:
Cash and cash equivalents $ 14,572 $ 30,126
Merchandise inventories 908,415 856,891
Other current assets   49,897     52,738  
Total current assets 972,884 939,755
 
Property and equipment 698,367 701,297
Less accumulated depreciation and amortization   (577,634 )   (567,045 )
Net property and equipment 120,733 134,252
 
Other assets   239,763     241,776  
Total Assets $ 1,333,380   $ 1,315,783  
 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Accounts payable and accrued liabilities $ 332,786 $ 300,437
Deferred revenue 83,339 82,540
Deferred tax liability   92,528     92,956  
Total current liabilities 508,653 475,933
 
Long-term debt 524,167 493,954
Deferred revenue – long-term 115,900 137,541
Other liabilities 32,696 34,840
 
Stockholders’ investment   151,964     173,515  
 
Total Liabilities and Stockholders’ Investment $ 1,333,380   $ 1,315,783  
 




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