Zale Corp., North America’s largest specialty retailer of fine jewelry, reported a 30% increase, before an unusual item in the prior year, in net earnings per share for the company’s fourth quarter, which ended July 31.

The company’s net earnings of $6.9 million, compared $6.7 million during the same period in 2003. Including last year’s $3.7 million debt redemption charge, the company reported fourth quarter net earnings of $2.9 million.

Net earnings for fiscal year 2004 were $106.5 million. For the prior fiscal year, net earnings, before unusual items, were $99.4 million. Including last year’s debt redemption costs of $3.7 million and a $136.3 million non-cash impairment charge, the company’s net loss totaled $40.6 million.

For the fiscal year, total revenues increased 4.2% to $2.304 billion, compared to $2.212 billion for the prior fiscal year. On a comparable store basis, sales increased 3.9% for the year.

“We are very pleased with these financial results for both the fourth quarter and the fiscal year,” said Mary L. Forte, Zale president and CEO. “Earnings per share rose 30% for the year while operating margins improved by 30 basis points. For the third consecutive year we generated in excess of $100 million in free operating cash flow as we generated $117 million in 2004 after capital expenditures. We continue to maintain a healthy balance sheet that provides substantial flexibility to pursue opportunities to extend our market leadership.”

The company also provided its forecast for its fiscal year ending July 2005. For the full year, it currently expects revenue growth of 5% to 7%, which includes a comparable store sales increase of 2% to 3%. The company said that it plans to open 85 stores and 50 kiosks during the year. Operating margins are anticipated to increase 40 basis points with earnings per share growing 12% to 14% for the year. Free operating cash flow is again expected to reach $100 million for fiscal year 2005.

Zale Corp., Dallas, operates approximately 2,235 retail locations throughout the United States, Canada and Puerto Rico, as well as through the Internet at www.zales.com. Zale Corp.’s brands include Zales Jewelers, Zales Fine Jewelry Outlet, Gordon’s Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewellers, Mappins Jewellers, and Piercing Pagoda.

JCK