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Zale Corporation Reports Second Quarter Fiscal 2013 Results

Stocks in this article: ZLC

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

Net earnings were $41 million, or $1.02 per diluted share, compared to net earnings of $29 million, or $0.77 per diluted share, in the second quarter of fiscal 2012.

Inventory at January 31, 2013 stood at $837 million, compared to $815 million in the same period last year.

First Half Fiscal 2013 Results

For the six months ended January 31, 2013, revenues were $1.03 billion, an increase of $13 million compared to the same period last year. Comparable store sales increased 3.2 percent in the first half of 2013. This increase follows a 5.8 percent increase in the same period last year. Operating earnings were $28 million, or 2.7 percent of revenues, compared to $21 million, or 2.0 percent of revenues, in the first half of fiscal 2012. Net earnings were $13 million, or $0.32 per diluted share, compared to a net loss of $3 million, or $0.09 per diluted share, in the same period last year.

Fiscal Year 2013 Outlook

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

Conference Call

Zale management will host a conference call today at 9:00 a.m. ET to discuss second 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 98420501. 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 1,750 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, earnings, interest expense, effective tax rate, merchandising and marketing initiatives and industry growth forecasts. 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; if the Company does not achieve targeted sales growth its operating results and earnings will be adversely impacted; 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 Six Months Ended
January 31, January 31,
2013 2012 2013 2012
 
Revenues $ 670,752 $ 663,762 $ 1,028,220 $ 1,014,745
Cost of sales   331,101     328,250     498,234     491,558  
Gross margin 339,651 335,512 529,986 523,187
% of Revenue 50.6 % 50.5 % 51.5 % 51.6 %
 
Selling, general and administrative 278,847 281,876 485,086 481,650
% of Revenue 41.6 % 42.5 % 47.2 % 47.5 %
Depreciation and amortization 8,605 9,293 17,477 19,182
Other charges (gains)   926     1,151     (847 )   1,649  
Operating earnings 51,273 43,192 28,270 20,706
% of Revenue 7.6 % 6.5 % 2.7 % 2.0 %
Interest expense   6,088     10,429     11,930     20,360  
Earnings before income taxes 45,185 32,763 16,340 346
Income tax expense   3,977     3,833     3,396     3,138  
Earnings (loss) from continuing operations 41,208 28,930 12,944 (2,792 )
Loss from discontinued operations, net of taxes   -     (92 )   -     (244 )
Net earnings (loss) $ 41,208   $ 28,838   $ 12,944   $ (3,036 )
 
Basic net earnings (loss) per common share:
Earnings (loss) from continuing operations $ 1.27 $ 0.90 $ 0.40 $ (0.09 )
Loss from discontinued operations   -     (0.01 )   -     -  
Net earnings (loss) per share $ 1.27   $ 0.89   $ 0.40   $ (0.09 )
 
Diluted net earnings (loss) per common share:
Earnings (loss) from continuing operations $ 1.02 $ 0.78 $ 0.32 $ (0.09 )
Loss from discontinued operations   -     (0.01 )   -     -  
Net earnings (loss) per share $ 1.02   $ 0.77   $ 0.32   $ (0.09 )
 
Weighted average number of common shares outstanding:
Basic 32,426 32,192 32,362 32,177
Diluted 40,305 37,238 40,470 32,177
 

     
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited, in thousands)
 
January 31,
2013 2012
ASSETS
Current Assets:
Cash and cash equivalents $ 18,516 $ 27,078
Merchandise inventories 836,624 815,424
Other current assets   46,149     42,191  
Total current assets 901,289 884,693
 
Property and equipment 694,826 700,982
Less accumulated depreciation and amortization   (578,266 )   (569,279 )
Net property and equipment 116,560 131,703
 
Other assets   239,447     240,264  
Total Assets $ 1,257,296   $ 1,256,660  
 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Accounts payable and accrued liabilities $ 261,329 $ 276,875
Deferred revenue 86,813 87,519
Deferred tax liability   93,073     92,987  
Total current liabilities 441,215 457,381
 
Long-term debt 473,975 428,345
Deferred revenue — long-term 115,664 134,903
Other liabilities   32,537     33,733  
 
Total stockholders’ investment   193,905     202,298  
 
Total liabilities and stockholders’ investment $ 1,257,296   $ 1,256,660  




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