Zale Q2 Net Loss $23.6 Million Comparable Sales -18%

Zale Corporation announced a net loss of $23.6 million for the second quarter ended January 31, 2009. The loss was mainly attributed to various charges totaling $28.6 million. Excluding these charges, earnings for the second quarter were $5.1 million.

Revenues for the second quarter were $679 million, compared to $828 million in the prior period, a decrease of 17.9 percent. Comparable store sales decreased 18.1 percent compared.

In February 2009, Canadian and Puerto Rican assets were added to the company’s $500 million asset-backed credit facility to increase collateral under the facility.

According to CEO Neal Goldberg, “Our operating results were negatively impacted by the extremely weak macro-economic environment. Additionally, in response to the continued deterioration in the business, we aggressively promoted store-wide discounts during our holiday sales season. We believe these discounts decreased gross margin by approximately 500 basis points.”

Zale stated it will continue its focus on “financial rigor and liquidity.” With inventory reduction a priority, merchandise inventories were lowered approximately $100 million from the prior year.

“We have identified key factors to improve our results,” Goldberg added. “Immediately following Christmas, we returned to a strategy that emphasized emotion with a promotional posture that is item-specific. The result has been more normalized 50 percent plus merchandise margins, along with comparable store sales improvement since the trends at Holiday.”

“Furthermore, we have identified additional inventory and expenses to drive out of the business. The plan will phase in savings intended to rationalize the size and scale of the organization to sales trends.”