Zale Comps up, but Mother’s Day Disappoints

Zale announced a rise in comps and profits for its third quarter, but said sales for Mother’s Day came in under projections. 

Same-store sales for the first 18 days of May, which includes Mother’s Day, fell 2.2 percent, it said. It said that represents a “meaningful shortfall” to its current business plan, putting prior projections “at risk.” 

However, same-store sales for the third quarter of fiscal 2014 rose 1.9 percent on a constant exchange basis. Overall sales totaled $431 million, a decline from last year’s $443 million—which it attributed to the loss of 78 stores compared to last year and a decline in the Canadian exchange rate.

Net earnings for the quarter increased from $5.052 million to $8.822 million, the company said. 

The flagship Zales chain scored the both results, with a 2.1 comp gain. Gordon’s comps rose 0.4 percent, while sales at Piercing Pagoda fell 0.1 percent. Overall, the company’s American fine jewelry comps (excluding Pagoda) rose 2 percent. 

In Canada, sales at Peoples rose 4.6 percent on a constant exchange basis, but fell 3.3 percent at Mappins.

Possibly because of the current fight over its pending acquisition to Signet, contrary to its recent custom, the company did not hold a conference call following the release of its financial results.

In related news, management offered yet another defense of the deal, which dissenting investor and 10 percent stockholder TIG Advisors has repeatedly slammed as inadequate.

Continuing the almost daily tit for tat with the investment firm, a letter signed by board chairman (and former Signet CEO) Terry Burman argues that the current deal provides a “compelling present value” for shareholders. 

Noting no other buyers have appeared to purchase Zale, Burman warned of “a risk of a material decline in the company’s share price if the transaction does not close.” 

“The board considered other potential acquirers and determined that it was unlikely that any of them would make an offer to acquire the company that would provide better value for Zale stockholders,” he wrote.

He also again noted that Zale’s revenue for the first two quarters of 2014 came in under its business plan.

 

JCK News Director