Zale Corp. on Tuesday reported a net loss from continuing operations of $45.3 million, for the first quarter ended Oct. 31, compared to a net loss of $26.7 million, for the prior year period. Revenues for the quarter fell 3.5 percent to $364 million. Same store sales for the period decreased 3.7 percent compared to the prior year.
Of the year-over-year decline in the net loss was due to a 35 percent lower share count in the fiscal 2009 quarter and a decrease in the estimated annual effective tax rate, the retailer said.
Total warranty sales were $21 million, excluding a $4 million decline in the value of the Canadian dollar from period to period. Warranty sales including the Canadian dollar decline were $17 million compared to $24 million in the prior period. Adjusted for total warranty sales, the net loss from continuing operations was $42 million, compared to a net loss from continuing operations of $17.9 million for the comparable quarter in fiscal 2008.
During the first quarter of fiscal 2009, the company liquidated $47 million in excess inventory, bringing total inventory liquidations since inception of the strategy in February to $174 million. At Oct. 31, merchandise inventories were down $21 million compared to the prior year period.
“Though the national economic environment is challenging, we have continued to deliver strong performance on both store operations and cost control. We have recently eliminated almost $15 million of additional capital expenditures from our fiscal 2009 plan, and we intend to find more avenues for reducing both capital and expenses in the coming year. Our work to consolidate and speed up our supply chain should enable us to run with significantly lower inventory, driving greatly improved turns,” said Neal Goldberg, Zale chief executive officer. “We have worked hard to improve the selection of merchandise and the overall experience our customers will have during this Holiday season. We believe that Zale’s position as the value provider in the industry will serve us well in these economic conditions,” added Goldberg.
Zale in its statement said that because of the uncertainties surrounding the national economy and consumer spending, it does not believe it can reliably gauge likely holiday performance or sales in the balance of fiscal 2009 with any precision. As a result, the company said it not believe that its previously issued earnings guidance should be relied upon.
The company said it has experienced a significant decline in sales during October and November. However, if these current sales trends continue, the company remains confident that it will still generate free cash flow of not less than $50 million for fiscal year 2009.