Zale Posts Modest Q4 Profits

Zale reported Thursday net earnings of $1.5 million for the company's fourth quarter ended July 31. For the same period last year, the Company reported a net loss of $27.4 million.

The loss included a non-cash, after-tax charge of $23.9 million, primarily relating to store closures.

Revenues for the quarter were $488 million compared to $491 million last year, a decrease of 0.5 percent, underscoring that profits were not a result of the company making a turnaround in its operations, but rather that they benefited from changes in accounting.

Revenues were $7.5 million or 1.5 percent less than prior year as a result of the change made in the method of amortizing jewelry protection plan sales. Comparable store sales for the fourth quarter decreased 0.5 percent.

“Fiscal 2007 was a year in which we focused on going back to the basics,” said CEO Betsy Burton. “We tested investments in inventory assortments as well as in payroll and marketing. While many of these initiatives paid off, others have been pared back. We will take these learnings as well as the opportunity to refine our pricing and promotional strategy for this holiday to drive meaningful earnings improvement in our all-important second quarter of fiscal 2008.”

Net earnings for fiscal year 2007 were $59.3 million, up from $53.6 million the year before. The earnings treat forward commodity contracts as derivatives under SFAS 133 and reflect the change in revenue recognition for jewelry protection plans as a result of the extended service period covered by plans during the year.

For the full fiscal year, revenues were flat at $2.44 billion, compared to the same period last year. Full fiscal year comparable store sales decreased 0.2 percent.