Zale Posts Growing 1Q Loss

Zale Corp. posted a net loss of $26.4 million for the first quarter, compared to a loss of $23.7 million the same period last year.  CEO Betsy Burton partially pinned the results on lower average ticket.

The company said in a release that its earnings guidance excluded the impact of derivative accounting on gold and silver contracts under SFAS 133 which resulted in an after-tax $5.4 million loss.  This loss would have been $0.01 per share under hedge accounting treatment within SFAS 133.  Excluding the net impact of derivative versus hedge accounting treatment, the company reported a net loss of $21.6 million.

Total revenues for the quarter ended October 31 were $432.5 million compared to $427.6 million last year, an increase of 1.1 percent.  Comparable store sales for the first quarter increased 0.4 percent.

“Earnings performance met expectations for the quarter and comparable store sales were consistent with plan as we moved through clearance and increased transactions were offset by a lower average ticket,” Burton said.

According to Burton, “We executed our plan for the quarter which included resetting all Sales stores with new and expanded assortments, clearing as much non-program merchandise as possible and making investments in payroll and inventory to prepare for a successful Holiday.”

Zale reiterated its second quarter guidance of comparable store sales growth of 3 percent to 4 percent and diluted earnings per share of $2.17 to $2.22, excluding the net impact of derivative versus hedge accounting treatment.

In related news, the jewelry retailer announced that Charles Sonsteby has been elected to its board of directors.  Sonsteby, 53, is currently the executive vice president and chief financial officer of Brinker International, a multi-billion dollar restaurant company.