Whitehall Jewellers third quarter loss widens; restates earnings

Whitehall Jewellers Inc.’s third-quarter loss widened considerably, hurt by increased legal fees due to a fraud lawsuit and federal investigations.

The company also restated its earnings dating back to 2000, lowering its net income by a total of five cents a share over the period, Dow Jones Business Wire reports.

In a press release Monday, Dec. 22, the jeweler reported a loss of $7.4 million compared with a loss of $5.1 million a year ago.

Sales rose 7.1%, to $66.2 million from $61.8 million, with same-store sales up 3.9%.

Whitehall Jewellers restated its earnings since 2000 after changing the accounting treatment of vendor allowances in response to a recent lawsuit and subsequent investigations by the U.S. Securities and Exchange Commission and U.S. Department of Justice.

The change decreased the company’s earnings per share by one cent in fiscal 2001, three cents in 2002, two cents in 2003, and reduced its loss by a penny a share in the first half of fiscal 2004, which ends Jan. 31.

Whitehall Jewellers said its third-quarter results included costs of four cents a share in increased legal fees, about seven cents a share for a change in the estimated annual effective income tax rate, three cents a share for a sales tax accrual adjustment, four cents a share for higher-than-estimated insurance costs and about three cents a share related to increased advertising expenses, Dow Jones reports.

Sales at Whitehall, rose 9.1% in comparable-store sales in November.

The company said that momentum has continued into December, noting that “strong” holiday season sales have its monthly same-store sales up in the mid single-digits through Dec. 21.

Whitehall plans to continue its new sales programs into 2004, though it warned it also expects to incur “substantial” fees in conjunction with its ongoing legal troubles.

Chicago-based Whitehall is one of two publicly traded U.S. jewelry retailers facing SEC and Department of Justice investigations stemming from a fraud lawsuit filed by Capital Factors Inc. against a company that supplied jewelry to Friedman’s. On Dec. 11, the company fired its chief financial officer.