Zale reports a 3.7 percent rise in fourth quarter sales

Zale Corp., North America’s largest specialty retailer of fine jewelry, said Thursday that fourth quarter comparable store sales increased 3.5 percent. Total revenues for the fourth quarter were $490 million, a 3.7 percent increase when compared to the same period of the previous year.

For the full fiscal year, total revenues increased 2.3 percent to $2.43 billion, compared to $2.38 billion for the prior fiscal year, the Dallas-based retailer said. Total revenues include $24 million this year and $50 million last year from certain Bailey Banks & Biddle stores which were closed in January of this year. Excluding these closed stores, total revenues were $2.41 billion, compared to $2.33 billion last year, an increase of 3.5 percent. Comparable store sales, which do not include these stores, increased 1.6 percent for the year.

The company also said it would record a pre-tax, largely non-cash charge of approximately $38 million to $40 million in the fourth quarter. The charge primarily consists of:

*. Inventory markdowns of $26 million to $27 million, of which over half relates to the Zales brand and reflects the recent decision to accelerate the clearance of previously discontinued assortments. The inventory charge also includes discontinued styles at Bailey Banks & Biddle and a residual amount related to closed Bailey Banks & Biddle stores.

*. Write-off of capital investments of approximately $5 million for an information technology initiative that the company has determined does not meet the needs of the business.

*. An asset impairment charge of approximately $4 million relating to certain test stores in the Gordon’s and Zale brands as well as discontinued retail repair operations.

Zale Corp. said it will announce complete fourth quarter and fiscal year 2006 earnings
results on Aug. 31.

Zale Corp. operates approximately 2,345 retail locations throughout the United States, Canada, and Puerto Rico. Through its ZLC Direct organization, Zale also operates online at www.zales.com and www.baileybanksandbiddle.com. Zale Corp.’s brands include Zales Jewelers, Zales Outlet, Gordon’s Jewelers, Bailey Banks & Biddle, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.