1 EXHIBIT 99 CONTACT: Stephen C. Massanelli Senior Vice President and Treasurer (972) 580-5032 Laura Moore Vice President, Corporate Communications (972) 580-5104 Naomi Rosenfeld/Carolyn Capaccio Morgen-Walke Associates Media Contact: Stacy Berns (212) 850-5600 FOR IMMEDIATE RELEASE ZALE CORPORATION ANNOUNCES STRONG NET EARNINGS FOR THE SECOND QUARTER AND $40 MILLION STOCK REPURCHASE PROGRAM Dallas, Texas, February 19, 1998--Zale Corporation (NYSE: ZLC), the nation's largest specialty retailer of fine jewelry, today announced operating results for the second quarter ended January 31, 1998. Net sales for the second quarter were $522.0 million compared to $505.1 million last year. Comparable store sales increased 9.4% for the same period. Operating earnings for the quarter, including a gain on sale of land of $4.7 million, rose to $102.6 million from $90.8 million for the comparative period. Net earnings for the quarter were $58.9 million, or $1.57 a diluted share, compared to net earnings of $51.5 million, or $1.41 a diluted share for the same period last year. Excluding the gain on sale of land, operating earnings were $97.8 million, or an increase of 7.8%. Net earnings, exclusive of this gain on sale, were $56.0 million, or $1.49 a diluted share, compared to last year's net earnings of $51.5 million, or $1.41 a diluted share. For the year to date, sales totaled $774.5 million, compared to $735.9 million for the same period last year. On a comparable store basis, year to date sales increased 8.3%. Operating earnings totaled $112.4 million, compared to $97.0 million for the same period last year, and net earnings totaled $60.0 million, compared to $50.4 million for the same period last year. "We are very pleased with our strong results as indicated by the fact that all three of our operating formats are performing at ever increasing levels of productivity and profitability," commented Robert J. DiNicola, Chairman and Chief Executive Officer. "This outstanding earnings performance was achieved even without the recently divested lease operation. Furthermore, it illustrates our continuing ability to grow the company while maintaining strict operating disciplines at every level." 2 Separately, the Company announced that its Board of Directors has approved a stock repurchase program pursuant to which the Company, from time to time and at management's discretion, may purchase through the current calendar year, up to an aggregate of $40 million of Zale common stock on the open market. "Our decision to implement the stock repurchase program clearly demonstrates confidence in the business and our belief that our company's stock is currently undervalued. The overall repurchase plan also anticipates the exercise of approximately 1.9 million Series A Warrants which expire on July 30, 1998," said Mr. DiNicola. "This repurchase program is consistent with our objective to further enhance shareholder value." Zale Corporation operates approximately 1,100 retail jewelry stores located throughout the United States, Guam and Puerto Rico, including Zales Jewelers, Gordon's Jewelers and Bailey, Banks and Biddle. This release includes certain forward-looking information that is based upon management's beliefs as well as on assumptions made by and data currently available to management. This information which has been, or in the future may be, included in reliance on the "safe harbor" provisions on the Private Securities Litigation Reform Act of 1995, is subject to a number of risks and uncertainties, including but not limited to the factors identified in the Company's Form 10-K and other documents filed with the Securities and Exchange Commission. Actual results may differ materially from those anticipated in such forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein may not be realized. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. (Table to Follow) 3 ZALE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Three Months Ended Six Months Ended January 31, January 31, -------------------------- -------------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Net Sales $ 522,017 $ 505,083 $ 774,543 $ 735,862 Cost of Sales 270,576 256,771 402,179 376,815 --------- --------- --------- --------- Gross Margin 251,441 248,312 372,364 359,047 Selling, General and Administrative Expenses 148,249 154,210 256,188 255,929 Depreciation and Amortization Expense 5,356 3,346 10,154 6,156 Unusual Item - Gain on Sale of Diamond Park Fine Jewelers Division Assets -- -- (1,634) -- Unusual Item - Gain on Sale of Land (4,720) -- (4,720) -- --------- --------- --------- --------- Operating Earnings 102,556 90,756 112,376 96,962 Interest Expense, Net 8,369 9,501 16,524 17,499 --------- --------- --------- --------- Earnings Before Income Taxes 94,187 81,255 95,852 79,463 Income Taxes 35,250 29,740 35,869 29,086 --------- --------- --------- --------- Net Earnings $ 58,937 $ 51,515 $ 59,983 $ 50,377 ========= ========= ========= ========= Earnings Per Common Share: Basic $ 1.65 $ 1.47 $ 1.69 $ 1.43 Diluted $ 1.57 $ 1.41 $ 1.60 $ 1.37 Weighted Average Number of Common Shares Outstanding: Basic 35,669 35,032 35,450 35,124 Diluted 37,584 36,606 37,576 36,781 4 ZALE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS) JANUARY 31, JULY 31, JANUARY 31, 1998 1997 1997 ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) ASSETS Current Assets: Cash and Cash Equivalents $ 113,708 $ 41,636 $ 26,918 Customer Receivables, Net 548,323 454,270 499,094 Merchandise Inventories 522,328 511,702 573,039 Other Current Assets 26,114 39,271 26,404 ----------- ----------- ----------- Total Current Assets 1,210,473 1,046,879 1,125,455 Property and Equipment, Net 152,938 138,011 128,862 Other Assets 45,715 43,616 43,663 Deferred Tax Asset, Net 52,700 52,700 56,500 ----------- ----------- ----------- Total Assets $ 1,461,826 $ 1,281,206 $ 1,354,480 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Current Portion of Long-term Debt $ 12 $ 328 $ 5 Accounts Payable and Accrued Liabilities 198,300 145,721 169,385 Deferred Tax Liability, Net 23,700 23,700 32,000 ----------- ----------- ----------- Total Current Liabilities 222,012 169,749 201,390 Non-current Liabilities 51,885 53,544 53,557 Long-term Debt 480,314 451,459 495,549 Excess of Revalued Net Assets Over Stockholders' Investment, Net 61,931 64,880 67,829 Commitments and Contingencies Stockholders' Investment: Preferred Stock -- -- -- Common Stock 363 350 355 Additional Paid-In Capital (Includes Stock Warrants) 444,577 401,121 396,090 Unrealized Gains on Securities 2,359 2,182 1,966 Accumulated Earnings 202,387 142,404 142,228 ----------- ----------- ----------- 649,686 546,057 540,639 Treasury Stock (4,002) (4,483) (4,484) ----------- ----------- ----------- Total Stockholders' Investment 645,684 541,574 536,155 ----------- ----------- ----------- Total Liabilities and Stockholders' Investment $ 1,461,826 $ 1,281,206 $ 1,354,480 =========== =========== ===========