CONTACT: | David H. Sternblitz |
Vice President and Treasurer | |
(972) 580-5047 | |
ZALE ANNOUNCES INCREASE IN SECOND QUARTER EPS TO $1.91
DALLAS, Texas, February 18, 2005 - Zale Corporation (NYSE: ZLC), North America’s largest specialty retailer of fine jewelry, today announced net earnings of $99 million, or $1.91 per diluted share, for the Company’s second quarter ended January 31, 2005. For the same period last year, the Company reported net earnings of $97 million, or $1.83 per diluted share. This represents an increase of 4.4% on a per share basis over the prior year.
Total revenues for the second quarter ended January 31, 2005 were $972 million, compared to $949 million for the same period last year, an increase of 2.5%. Comparable store sales decreased 0.6% for the same period.
Revenues for the year-to-date totaled $1.395 billion, compared to $1.366 billion for the same period last year, an increase of 2.2%. On a comparable store basis, year-to-date sales decreased 0.7%. Year-to-date net earnings totaled $88 million or $1.69 per diluted share. For the same period last year, net earnings were $88 million, or $1.63 per diluted share. This represents a 3.7% increase on a per share basis for the year-to-date over last year.
“By maintaining tight disciplines in the business, we kept our inventory and expense structure in line with our plan,” commented Mary L. Forté, President and Chief Executive Officer. “This minimized the impact of our revenue shortfall to plan and allowed us to deliver earnings per share growth over the prior year.”
Ms. Forté continued, “We feel good about the strategy we have in place. We are focusing at the Zales brand on implementing direct product sourcing, refining the merchandise mix and improving store productivity. The remaining brands all had positive comparable store sales increases for the quarter and are showing improvement from a number of our corporate initiatives. The early completion of our $50 million stock repurchase program signifies the confidence we have in our ability to continue executing the game plan as we enter the back half of our fiscal year.”
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As previously announced, a conference call will be held today at 9:00 a.m. Eastern Time. Parties interested in participating should dial 706-643-7467 five minutes prior to the scheduled start time. A webcast of the call, as well as a replay, will be available on the Company’s Web site at www.zalecorp.com. For additional information, contact Investor Relations.
Zale Corporation is North America’s largest specialty retailer of fine jewelry operating approximately 2,330 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation’s brands include Zales Jewelers, Zales Fine Jewelry Outlet, Gordon’s Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Through its ZLC Direct organization, Zale also operates online atwww.zales.com andwww.baileybanksandbiddle.com. Additional information on Zale Corporation and its brands is available atwww.zalecorp.com.
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This release contains forward-looking statements, including statements regarding the Company's sales and earnings estimates for the second quarter ending January 31, 2005 which are based upon management's beliefs as well as on assumptions made by and data currently available to management. These forward-looking statements are not guarantees of future performance and a variety of factors could cause the Company's actual results to differ materially from the anticipated or expected results expressed in these forward-looking statements. The following list, which is not intended to be an all-encompassing list of risks and uncertainties affecting the Company, summarizes several factors that could cause the Company's actual results to differ materially from those anticipated or expected in these forward-looking statements: if the general economy performs poorly, discretionary spending on goods that are, or are perceived to be, "luxuries" may not grow and may even decrease; the concentration of a substantial portion of the Company's sales in three, relatively brief selling seasons means that the Company's performance is more susceptible to disruptions; most of the Company's sales are of products that include
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diamonds, precious metals and other commodities, and fluctuations in the availability and pricing of commodities could impact the Company's ability to obtain and produce products at favorable prices; the Company's sales are dependent upon mall traffic; the Company operates in a highly competitive industry; any failure by the Company to manage its inventory effectively will negatively impact sales and earnings; because of the Company's dependence upon a small number of landlords for a substantial number of the Company's locations, any significant erosion of the Company's relationships with those landlords would negatively impact the Company's ability to obtain and retain store locations; changes in regulatory requirements relating to the extension of credit may increase the cost of or adversely affect the Company's operations; any disruption in, or changes to, the Company's private label credit card arrangement with Citi may adversely affect the Company's ability to provide consumer credit and write credit insurance; acquisitions involve special risks, including the possibility that the Company may not be able to integrate acquisitions into its existing operations; and certain other factors described from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2004. The Company disclaims any obligation to update or revise publicly or otherwise any forward-looking statements to reflect subsequent events, new information or future circumstances.
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(Tables and reconciliations to follow)
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ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
(amounts in thousands, except per share amounts)
(unaudited)
Three Months Ended | Six Months Ended | ||||||||||||
January 31, | January 31, | ||||||||||||
2005 |
| 2004 |
| 2005 |
| 2004 | |||||||
Total Revenues | $ | 972,332 | $ | 949,023 | $ | 1,395,106 | $ | 1,365,667 | |||||
Costs and Expenses: | |||||||||||||
Cost of Sales | 480,229 | 469,936 | 685,509 | 675,626 | |||||||||
Selling, General and Administrative Expenses | 315,937 | 307,122 | 532,968 | 514,911 | |||||||||
Cost of Insurance Operations | 1,432 | 1,345 | 2,868 | 2,961 | |||||||||
Depreciation and Amortization Expense | 15,027 | 14,143 | 29,231 | 28,025 | |||||||||
Operating Earnings | 159,707 | 156,477 | 144,530 | 144,144 | |||||||||
Interest Expense, Net | 2,257 | 2,046 | 4,432 | 4,382 | |||||||||
Earnings Before Income Taxes | 157,450 | 154,431 | 140,098 | 139,762 | |||||||||
Income Taxes | 58,253 | 57,136 | 51,833 | 51,712 | |||||||||
Net Earnings | $ | 99,197 | $ | 97,295 | $ | 88,265 | $ | 88,050 | |||||
Earnings Per Common Share - Basic: | |||||||||||||
Net Earnings Per Share | $ | 1.94 | $ | 1.86 | $ | 1.71 | $ | 1.66 | |||||
Earnings Per Common Share - Diluted: | |||||||||||||
Net Earnings Per Share | $ | 1.91 | $ | 1.83 | $ | 1.69 | $ | 1.63 | |||||
Weighted Average Number of Common Shares Outstanding: | |||||||||||||
Basic | 51,102 | 52,198 | 51,499 | 52,986 | |||||||||
Diluted | 51,885 | 53,156 | 52,221 | 53,910 | |||||||||
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(amounts in thousands)
January 31, |
| July 31, |
| January 31, |
| |||||
|
| 2005 |
| 2004 |
| 2004 | ||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and Cash Equivalents | $ | 55,541 | $ | 63,124 | $ | 55,643 | ||||
Merchandise Inventories | 956,956 | 826,824 | 872,007 | |||||||
Other Current Assets | 55,611 | 63,956 | 48,257 | |||||||
Total Current Assets | 1,068,108 | 953,904 | 975,907 | |||||||
Property and Equipment, Net | 280,300 | 266,688 | 261,730 | |||||||
Goodwill, Net | 90,025 | 85,583 | 85,730 | |||||||
Other Assets | 35,318 | 35,909 | 37,337 | |||||||
Deferred Tax Asset, Net | — | — | 20,766 | |||||||
Total Assets | $ | 1,473,751 | $ | 1,342,084 | $ | 1,381,470 | ||||
LIABILITIES AND STOCKHOLDERS’ INVESTMENT | ||||||||||
Current Liabilities: | ||||||||||
Accounts Payable and Accrued Liabilities | $ | 464,668 | $ | 319,599 | $ | 417,453 | ||||
Deferred Tax Liability, Net | 51,313 | 51,417 | 46,187 | |||||||
Total Current Liabilities | 515,981 | 371,016 | 463,640 | |||||||
Non-current Liabilities | 40,035 | 42,486 | 99,876 | |||||||
Deferred Tax Liability, Net | 5,781 | 4,968 | ||||||||
Long-term Debt | 135,800 | 197,500 | 138,700 | |||||||
Commitments and Contingencies | ||||||||||
Stockholders’ Investment: | ||||||||||
Preferred Stock | — | — | — | |||||||
Common Stock | 523 | 521 | 426 | |||||||
Additional Paid-In Capital | 69,431 | 63,661 | 600,703 | |||||||
Accumulated Other Comprehensive Income | 21,175 | 13,470 | 15,236 | |||||||
Accumulated Earnings | 736,727 | 648,462 | 677,172 | |||||||
Deferred Compensation | (1,702 | ) | — | — | ||||||
826,154 | 726,114 | 1,293,537 | ||||||||
Treasury Stock | (50,000 | ) | — | (614,283 | ) | |||||
Total Stockholders’ Investment | 776,154 | 726,114 | 679,254 | |||||||
Total Liabilities and Stockholders’ Investment | $ | 1,473,751 | $ | 1,342,084 | $ | 1,381,470 |