Zale Guides Below Estimate

A gain lifts earnings in the third quarter.
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third-quarter profit rose from a year ago, thanks to a gain, but the diamond retailer guided lower for the current period.

Zale earned $16.8 million, or 35 cents a share, in the quarter, up from $14.5 million, or 28 cents a share, last year. Excluding a gain related to retirement benefits and two smaller charges, the company earned $11.6 million, or 24 cents a share, in the quarter, beating estimates by 3 cents a share.

Revenue rose 2.2% from last year to $526.9 million, matching estimates. Zale's same-store sales rose 2.5% in the third quarter.

For the fourth quarter, the company pegged per-share earnings at between nothing and 2 cents a share, below the Thomson First Call consensus profit forecast of 7 cents a share. Same-store sales should rise by a percentage in the low single digits.

" We are pleased with our performance for the third quarter, especially the sales momentum we are gaining," Zale said. "Zales, Zale Canada, Zales Outlet, Bailey Banks & Biddle and Gordon's all produced positive comparable-store sales, while margins and expenses were in line with our expectations."

The stock closed at $21.80 Tuesday, down 13% for the year and roughly 11.8 times the Thomson First Call 2006 earnings consensus of $1.84 a share.