Zale Posts Bigger Losses, Higher Revenues

Zale Corp. saw an uptick in revenues and comparable store sales in the fourth quarter, but its net loss widened, according to the company’s financial statement released Aug. 31.

The company’s total revenues for the fourth quarter, ended July 31, totaled $377 million, a 9 percent increase from 2010, while its net loss ballooned to $33 million, up from $29 million last year.

“In fiscal 2011, we made substantial progress in the multi-year initiative to return to profitability,” said Theo Killion, CEO, in a statement. “The strength of our assortment, marketing and field organization position us well to navigate through the current economic environment.”

Some highlights of Zale’s results for the fourth quarter and fiscal year 2011:

  • 4Q Revenues: $377 million, up 9.4 percent
  • 4Q Net loss: $32.6 million, up from $29 million
  • 4Q Comparable store sales: up 10 percent
  • 4Q Gross margin: 51.3 percent, compared to 52.7 percent in 2010
  • 4Q Gross margin on sales: $193 million, up 6 percent
  • FY 2011 Revenues: $1.74 billion, up 7.8 percent
  • FY 2011 Net loss: $112 million, up from $96 million
  • FY 2011 Comparable store sales: up 8.1 percent
  • FY 2011 Gross margin: 50.5 percent, compared to 50.4 percent in 2010
  • FY 2011 Gross margin on sales: $880 million, up 8.1 percent

View Zale’s full financial report.

“Despite the headwinds imposed by volatility in commodity markets and the overall economy, our gross margin performance in the quarter and full year reflects the traction we are gaining in the marketplace,” said Matt Appel, Zale’s chief administrative officer and chief financial officer, during the company’s conference call. “With the strong foundation that we have put in place over the past year and a half, we are now better positioned to achieve our number one goal of returning the business to profitability.”

It was Zale’s third consecutive quarter of positive same store sales. During the quarter, the company also closed 10 fine jewelry stores and seven kiosks. “Our expectation continues to be that we will selectively open stores where the opportunity is compelling and close stores that are underperforming if the economics make sense,” said Appel.

The widened net loss is in large part owing to the the absense of a $4 million tax benefit related to net operating loss carrybacks pursuant to the Business Assistance Act of 2009 and a one-time gain of $7 million, net of issuance costs, related to warrants issued pursuant to the Senior Secured Term Loan, which occured in the fourth quarter of 2010.

The company also reported that it had implemented price increases across their brands in response to the pressures imposed by the commodity cost environment. “With the increases in commodity costs, it is critical that we are thoughtful about passing along price increases to our guests,” said Killion. 

Zale also announced that it has initiated a program to provide alternative financing options to its U.S. customers.

Monterey Financial Services, a consumer finance company, has agreed to become the first partner in this program. These financing options are immediately available in all Zales, Zales Outlet, and Gordon’s retail stores.