Exhibit 99.1
Zale Announces 31% Increase in Second Quarter EPS to $3.66 vs. $2.80,
before Non-Cash Charge from Prior Year
DALLAS--(BUSINESS WIRE)--Feb. 17, 2004--Zale Corporation
(NYSE:ZLC), North America's largest specialty retailer of fine
jewelry, today announced net earnings of $97 million, or $3.66 per
diluted share, for the Company's second quarter ended January 31,
2004. For the same period last year, the Company reported net earnings
of $90 million, or $2.80 per diluted share, excluding a non-cash
impairment charge from its annual review of goodwill. This represents
an increase of 31% on a per share basis over the prior year, excluding
the non-cash charge. For the same period last year, including the
non-cash impairment charge of $136 million, the Company had a net loss
of $46 million, or $1.44 per share.
Total revenues for the second quarter ended January 31, 2004 were
$949 million, compared to $908 million for the same period last year,
an increase of 4.5%. Comparable store sales increased 4.3% for the
same period.
Revenues for the year-to-date totaled $1.366 billion, compared to
$1.320 billion for the same period last year. On a comparable store
basis, year-to-date sales increased 3.4%. Year-to-date net earnings
totaled $88 million or $3.27 per diluted share. For the same period
last year, the net earnings before the non-cash impairment charge was
$83 million, or $2.56 per diluted share. This represents a 28%
increase on a per share basis for the year-to-date over last year.
Year-to-date net loss for last year, including the $136 million
non-cash impairment charge, totaled $53 million, or $1.63 per share.
"We are very pleased with these earnings results as they reflect
solid execution across the entire organization," commented Mary L.
Forte, President and Chief Executive Officer. "We maximized our
opportunities during the period while at the same time delivered
margin expansion largely supported by our sourcing efforts.
Additionally, we maintained tight controls on expenses and our
distribution and handling of product was at record levels. This
productivity ensured good in-stock positions at each of our brands and
we believe has us well-positioned to maximize the spring season."
The Company further noted it now expects comparable store sales to
increase 3.0% to 4.0% for the third fiscal quarter and earnings per
share to range between $0.36 and $0.39. In increasing its guidance,
management cited the current positive trends in the business along
with opportunities in its third quarter.
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 2,230 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, business
execution and third quarter sales and earnings, 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 Six Months Ended
January 31, January 31,
------------------- -----------------------
2004 2003 2004 2003
--------- --------- ----------- -----------
Total Revenues $949,023 $908,359 $1,365,667 $1,320,476
Costs and Expenses:
Cost of Sales 469,936 461,472 675,626 665,820
Selling, General and
Administrative
Expenses 307,122 286,184 514,911 486,286
Cost of Insurance
Operations 1,345 2,178 2,961 4,412
Depreciation and
Amortization Expense 14,143 13,735 28,025 27,952
Impairment of Goodwill --- 136,300 --- 136,300
--------- --------- ----------- -----------
Operating Earnings (Loss) 156,477 8,490 144,144 (294)
Interest Expense, Net 2,046 1,808 4,382 3,696
--------- --------- ----------- -----------
Earnings (Loss) Before
Income Taxes 154,431 6,682 139,762 (3,990)
Income Taxes 57,136 52,904 51,712 48,955
--------- --------- ----------- -----------
Net Earnings (Loss) $ 97,295 $(46,222) $ 88,050 $ (52,945)
========= ========= =========== ===========
Earnings (Loss) Per Common
Share - Basic:
Net Earnings (Loss) Per
Share $ 3.73 $ (1.44) $ 3.32 $ (1.63)
Earnings (Loss) Per Common
Share - Diluted:
Net Earnings (Loss) Per
Share $ 3.66 $ (1.44) $ 3.27 $ (1.63)
Weighted Average Number of
Common
Shares Outstanding:
Basic 26,099 32,081 26,493 32,522
Diluted 26,578 32,081 26,955 32,522
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
January 31, July 31, January 31,
2004 2003 2003
----------- ----------- -----------
(unaudited) (unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 55,643 $ 35,273 $ 172,830
Merchandise Inventories 872,007 798,761 811,926
Other Current Assets 48,257 52,450 50,605
----------- ----------- -----------
Total Current Assets 975,907 886,484 1,035,361
Property and Equipment, Net 261,730 266,167 272,056
Goodwill, Net 85,730 82,199 77,618
Other Assets 37,337 38,133 32,958
Deferred Tax Asset, Net 20,766 21,123 42,921
----------- ----------- -----------
Total Assets $1,381,470 $1,294,106 $1,460,914
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
Current Liabilities:
Accounts Payable and Accrued
Liabilities $ 417,453 $ 307,775 $400,382
Deferred Tax Liability, Net 46,187 46,266 21,470
----------- ----------- -----------
Total Current Liabilities 463,640 354,041 421,852
Non-current Liabilities 99,876 103,342 106,111
Long-term Debt 138,700 184,400 86,769
Commitments and Contingencies
Stockholders' Investment:
Preferred Stock --- --- ---
Common Stock 426 415 407
Additional Paid-In Capital 600,703 566,689 550,004
Accumulated Other Comprehensive
Income (Loss) 15,236 6,834 (2,933)
Accumulated Earnings 677,172 589,122 576,822
Deferred Compensation --- --- (16)
----------- ----------- -----------
1,293,537 1,163,060 1,124,284
Treasury Stock (614,283) (510,737) (278,102)
----------- ----------- -----------
Total Stockholders' Investment 679,254 652,323 846,182
----------- ----------- -----------
Total Liabilities and
Stockholders' Investment $1,381,470 $1,294,106 $1,460,914
=========== =========== ===========
CONTACT: Zale Corporation, Dallas
David H. Sternblitz, 972-580-5047
Senior Director, Investor and Public Relations