Exhibit 99.1
Zale Announces 32% Increase in Third Quarter EPS to $0.29
DALLAS--(BUSINESS WIRE)--May 15, 2003--Zale Corporation
(NYSE:ZLC), the largest specialty retailer of fine jewelry in North
America, announced today net earnings of $9.4 million, or $0.29 per
diluted share, for the Company's third quarter ended April 30, 2003.
This represents an increase of 32% on a per share basis over the same
period last year when the Company reported net earnings of $7.7
million, or $0.22 per diluted share.
Total revenues for the third quarter ended April 30, 2003 were
$449.4 million, compared to $449.2 million for the same period last
year, an increase of 0.1%. Comparable store sales increased 0.3% for
the same period.
Total revenues for the year-to-date totaled $1.770 billion
compared to $1.756 billion for the same period last year, an increase
of 0.8%. On a comparable store basis, year-to-date sales increased
0.6%. Year-to-date net earnings totaled $92.7 million or $2.86 per
diluted share, excluding a $136.3 million non-cash impairment charge
from the Company's annual review of goodwill. For the same period last
year, net earnings before an unusual item and the effect of a change
in accounting principle were $96.8 million, or $2.76 per diluted
share. The year-to-date net loss, including the $136.3 million
non-cash impairment charge, totaled $43.6 million, or $1.35 per share.
For the same period last year, net earnings, including a gain from an
unusual item of $2.2 million net of taxes and the effect of a change
in accounting principle of $41.3 million, were $140.3 million, or
$4.00 per diluted share.
Mary L. Forte, President and Chief Executive Officer commented, "A
key focus entering fiscal 2003 was to keep the business stable and on
track in a volatile external environment. We continued to meet this
goal with the successful execution of our strategy. This is
demonstrated by the fact that even with relatively flat sales this
quarter, we still achieved our earnings objectives."
Ms. Forte continued, "During the period, operating disciplines
remained firmly in place with tight controls on inventory and expenses
as reflected in the 70 basis points of operating margin improvement
over last year. Additionally, we continued to improve our solitaire
and wedding categories, driving traffic outside of the key gift-giving
periods. This resulted in a strong earnings improvement for the
quarter along with the strengthening of our balance sheet."
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 2,265 retail locations throughout
the United States, Canada and Puerto Rico, as well as online. Zale
Corporation's brands include Zales Jewelers, Zales Outlet, Zale Direct
at www.zales.com, Gordon's Jewelers, Bailey Banks & Biddle Fine
Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda.
Additional information on Zale Corporation and its brands is available
on the Internet at www.zalecorp.com.
This release contains forward-looking statements, including
statements regarding the Company's objectives and expectations
regarding its merchandising and marketing strategies and result of
operations, 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: that low or negative
growth in the economy or in the financial markets will occur and
reduce discretionary spending on goods that are, or are perceived to
be, "luxuries;" that levels of mall traffic may decline as a result of
economic or other factors; that warehousing and distribution
productivity and capacity can be further improved to support the
Company's distribution requirements; that strong competitive responses
may impact the Company's efforts to leverage its brand power with its
marketing, merchandising and promotional efforts; that seasonality of
the retail jewelry business or downturns in consumer spending during
the fourth calendar quarter may adversely affect the Company's
results; that the Company may not be able to continue to manage its
inventory and product supply effectively to respond to consumer
demand; that fluctuations in diamond prices may negatively affect the
business; that legal or governmental proceedings may have an adverse
effect on the financial results or reputation of the Company; that key
personnel who have been hired or retained by the Company may depart;
that any disruption in the Company's private label credit card
arrangement may adversely affect the Company's ability to provide
consumer credit; or that changes in government or regulatory
requirements may increase the cost of or adversely affect the
Company's operations. 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.
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
April 30, April 30,
------------------- -----------------------
2003 2002 2003 2002
--------- --------- ----------- -----------
Total Revenues $449,383 $449,150 $1,769,859 $1,756,161
Costs and Expenses:
Cost of Sales 220,107 218,502 885,927 869,272
Selling, General and
Administrative Expenses 197,010 200,216 683,298 678,212
Impairment of Goodwill --- --- 136,300 ---
Cost of Insurance
Operations 2,000 2,356 6,412 6,058
Depreciation and
Amortization Expense 13,820 14,520 41,772 43,802
Unusual Item - Retiree
Medical Curtailment
Gain --- --- --- (3,502)
--------- --------- ----------- -----------
Operating Earnings 16,446 13,556 16,150 162,319
Interest Expense, Net 1,578 1,425 5,274 5,335
--------- --------- ----------- -----------
Earnings Before Income
Taxes 14,868 12,131 10,876 156,984
Income Taxes 5,501 4,481 54,455 57,989
--------- --------- ----------- -----------
Earnings Before Effect of
Accounting Change 9,367 7,650 (43,579) 98,995
Effect of a Change in
Accounting for the Write-
off of the Excess of
Revalued Net Assets Over
Stockholders' Investment --- --- --- (41,287)
--------- --------- ----------- -----------
Net Earnings $9,367 $7,650 $(43,579) $140,282
========= ========= =========== ===========
Earnings Per Common Share -
Basic:
Before effect of change in
accounting principle $0.29 $0.22 $(1.35) $2.85
Net Earnings Per Share $0.29 $0.22 $(1.35) $4.03
Earnings Per Common Share -
Diluted:
Before effect of change in
accounting principle $0.29 $0.22 $(1.35) $2.83
Net Earnings Per Share $0.29 $0.22 $(1.35) $4.00
Weighted Average Number of
Common Shares Outstanding:
Basic 32,075 34,678 32,376 34,783
Diluted 32,172 35,049 32,376 35,036
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
April 30, July 31, April 30,
2003 2002 2002
----------- ----------- -----------
(unaudited) (unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $172,655 $84,887 $148,610
Merchandise Inventories 813,066 782,316 794,770
Other Current Assets 57,082 47,915 51,477
----------- ----------- -----------
Total Current Assets 1,042,803 915,118 994,857
Property and Equipment, Net 268,133 284,438 290,761
Goodwill, Net 81,141 212,039 216,206
Other Assets 32,671 34,654 33,204
Deferred Tax Asset, Net 31,334 31,604 40,139
----------- ----------- -----------
Total Assets $1,456,082 $1,477,853 $1,575,167
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Current Liabilities:
Accounts Payable and Accrued
Liabilities $392,685 $331,663 $398,281
Deferred Tax Liability, Net 9,974 10,104 18,953
----------- ----------- -----------
Total Current Liabilities 402,659 341,767 417,234
Non-current Liabilities 104,971 109,530 111,353
Long-term Debt 86,780 86,749 99,700
Commitments and Contingencies
Stockholders' Investment:
Preferred Stock --- --- ---
Common Stock 407 407 406
Additional Paid-In Capital 550,074 549,848 547,218
Accumulated Other Comprehensive
Income (Loss) 5,098 (6,559) (5,199)
Accumulated Earnings 586,188 629,767 626,117
Deferred Compensation --- (115) (6,779)
----------- ----------- -----------
1,141,767 1,173,348 1,161,763
Treasury Stock (280,095) (233,541) (214,883)
----------- ----------- -----------
Total Stockholders' Investment 861,672 939,807 946,880
----------- ----------- -----------
Total Liabilities and Stockholders'
Investment $1,456,082 $1,477,853 $1,575,167
=========== =========== ===========
CONTACT: Zale Corporation, Dallas
David H. Sternblitz
Senior Director, Investor and Public Relations
972/580-5047