Zale Corp., North America’s largest specialty retailer of fine jewelry,Thursday reported a loss of $26.4 million for the company’s fourth quarter ended July 31.

The Dallas-based company pegged the loss on a number of mostly non-cash after-tax charge totaling $23.9 million. the include: $16.8 million for inventory write-downs at the Zales and Bailey Banks & Biddle brands, $3.3 million related to the termination of an information technology initiative that does not meet the needs of the business, and a $2.9 million asset impairment charge related to certain test stores.

Total revenues for the fourth quarter increased by 3.9 percent to $490.7 million compared to last year’s total revenue of $472.3 million. Last year’s fourth quarter total revenues included $10.3 million from certain Bailey Banks & Biddle stores that were closed in this year’s second fiscal quarter. Excluding these stores, total revenues increased 6.2 percent over last year’s $462 million. Fourth quarter same-store sales increased 3.5 percent compared to last year.

“Our fourth quarter results, excluding the charges, were on plan,” said Betsy Burton, Zale president and CEO. “We had better than expected top line growth in the Zales brand, offset by lower gross margins due to increased clearance.”

For the year, profit dropped to $54.5 million from $106.8 million during the same period last year. Revenue edged up to $2.44 billion from $2.38 billion last year.

Again earnings the company said that earnings were affected by the $27.3 million in fourth-quarter charges. But, it also includes a number of other charges during the first nine months of the year. They include: Charges related to the closing of certain Bailey Banks & Biddle locations of $21.2 million, severances for former chief executive officer and chief operating officer of $7.5 million, a tax benefit of $11.5 million related to income repatriated from Canada under the American Jobs Creation Act, and a gain from the settlement of certain retirement benefit obligations of $8.4 million.

Excluding these items, fiscal 2006 net earnings amounted to $90.7 million, or $1.84 per diluted share. For the same period last year, net earnings were $106.8 million, or $2.05 per diluted share.

For the full fiscal year, total revenues increased 2.3 percent to $2.439 billion, compared to $2.383 billion for the prior fiscal year and includes: $24.3 million and $49.8 million, respectively, from the closed Bailey Banks & Biddle stores. Excluding these stores, total revenues were $2.4 billion, compared to $2.3 billion last year, an increase of 3.5 percent. Same-store sales for the year increased 1.6 percent.

For the first quarter ending Oct. 31, Zale expects same-store sales to increase from 0 percent to 2 percent.

It expects revenue growth of approximately 3 percent to 5 percent and same-store sales growth of 2 percent to 3 percent for the 2007 fiscal year. 

“In the first quarter, we will continue to aggressively clear discontinued merchandise in the Zales brand while concurrently investing in new and expanded assortments,” Burton said. “Our focus is to deliver a solid performance across all brands in the critical holiday quarter.”

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