Zale first quarter sales are flat

Zale Corp., North America’s largest specialty retailer of fine jewelry, reported that for the first quarter same-store sales decreased 1.2 percent. Total revenues for the period were $427 million compared to last year’s first quarter revenues of $423 million, an increase of 0.9 percent.

“We are disappointed with these sales results,” said Mary L. Forte, president and CEO of the Irving, Texas-based company. “Delay in receipts of new merchandise related to the Zales repositioning resulted in lower than planned in-stock positions during the quarter. The considerable changes to our product offerings, along with the establishment of new vendor relationships, has temporarily extended the lead time of supplying merchandise to our stores. These inventory issues negatively impacted the performance at the Zales brand, which had a significant effect on our consolidated results.

Forte continued, “We believe our merchandising and marketing efforts have been appropriately targeted throughout each of our brands to drive demand and meet the needs of our gift-giving customers this Holiday season. We have been pleased with the initial customer response to our new merchandise assortments, which we expect will gain momentum with the launch of the Zales marketing campaign.”

The company also said that the impact of the hurricanes on the quarter resulted in lost sales.

In connection with the closing of approximately 30 Bailey Banks & Biddle stores that do not fit with the brand’s long-term positioning in the luxury goods market, Zale said it expects to record, in its first fiscal quarter, an impairment charge of approximately $8 million. This charge, being non-cash in nature, does not affect the company’s cash flows. The company also incurred incremental markdown charges per share related to the liquidation of inventory in a subset of these stores scheduled for closure.

Based on the sales performance, the impact of the hurricanes, the impairment and markdown charges, Zale said it expects a net loss for the first quarter ended October 31. Zale plans to announce its first quarter fiscal 2006 earnings results on Nov. 16.

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