Exhibit 99.1
Zale Corporation Announces First Quarter Earnings Results
DALLAS--(BUSINESS WIRE)--Nov. 16, 2006--Zale Corporation (NYSE: ZLC), North
America's largest specialty retailer of fine jewelry, today announced a net
loss, of $26.4 million, or $0.55 per share, for the Company's first quarter
ended October 31, 2006. The Company's earnings guidance excluded the impact of
derivative accounting on gold and silver contracts under SFAS 133 which resulted
in an after-tax $5.4 million loss, or $0.11 per share. This loss would have been
$0.01 per share under hedge accounting treatment within SFAS 133. Excluding the
net impact of derivative versus hedge accounting treatment, the Company reported
a net loss of $21.6 million, or $0.45 per share. For the same period last year,
the Company reported a net loss of $23.7 million, or $0.47 per share. Excluding
the non-cash impairment charge of $5.3 million, or $0.10 per share from the
closure of Bailey Banks & Biddle locations in last year's first quarter, the
Company reported a net loss of $18.4 million, or $0.36 per share.
Total revenues for the quarter ended October 31, 2006 were $432.5 million
compared to $427.6 million last year, an increase of 1.1%. Comparable store
sales for the first quarter increased 0.4%.
"Earnings performance met expectations for the quarter and comparable store
sales were consistent with plan as we moved through clearance and increased
transactions were offset by a lower average ticket," commented Betsy Burton,
President and Chief Executive Officer.
Ms. Burton continued, "We executed our plan for the quarter which included
resetting all Zales stores with new and expanded assortments, clearing as much
non-program merchandise as possible and making investments in payroll and
inventory to prepare for a successful Holiday."
The Company reiterates its second quarter guidance of comparable store
sales growth of 3% to 4% and diluted earnings per share of $2.17 to $2.22,
excluding the net impact of derivative versus hedge accounting treatment.
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 at 972-580-5047.
Zale Corporation is North America's largest specialty retailer of fine
jewelry operating approximately 2,366 retail locations throughout the United
States, Canada and Puerto Rico, as well as online. Zale Corporation's brands
include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Bailey Banks & Biddle
Fine Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Zale
also operates online at www.zales.com and www.baileybanksandbiddle.com.
Additional information on Zale Corporation and its brands is available at
www.zalecorp.com.
This release contains forward-looking statements, including statements
regarding the Company's sales and earnings guidance for the second quarter of
fiscal year 2007, inventory management and merchandising and marketing
strategies. 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 results expressed in the forward-looking statements. These
factors include, but are not limited to: 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 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; changes in regulatory requirements or
in the Company's private label credit card arrangement with Citi may increase
the cost of or adversely affect the Company's operations and its 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. For other factors, see the Company's
filings with the Securities and Exchange Commission, including its Annual Report
on Form 10-K for the fiscal year ended July 31, 2006. 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.
(Tables and reconciliations to follow)
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED FINANCIAL INFORMATION
(Unaudited, Dollars in thousands, except per share amounts)
Three Months Ended
October 31,
------------------
2006 2005
--------- --------
Total Revenues 432,488 427,639
Comparable Store Sales % 0.4% -1.2%
Cost of Sales 207,464 208,812
--------- --------
Gross Margin 225,024 218,827
% of Revenue 52.0% 51.2%
Selling, General and Administrative Expenses 236,975 237,255
% of Revenue 54.8% 55.5%
Cost of Insurance Operations 1,547 1,825
Depreciation and Amortization Expense 14,851 15,294
Derivatives Loss 8,560 0
--------- --------
Operating Loss (36,909) (35,547)
% of Revenue -8.5% -8.3%
--------- --------
Interest Expense, Net 5,256 2,354
--------- --------
Loss Before Income Taxes (42,165) (37,901)
Income Taxes (15,770) (14,240)
--------- --------
Net Loss (26,395) (23,661)
========= ========
Basic Loss Per Common Share:
Net Loss Per Share (0.55) (0.47)
Diluted Loss Per Common Share:
Net Loss Per Share (0.55) (0.47)
Weighted Average Number of Common
Basic 48,210 50,599
Diluted 48,210 50,599
- --------------------------------------------------- ------------------
Reconciliation of GAAP Information to Non-GAAP basis 1st Quarter,
diluted:
Three Months Ended
October 31, 2006
------------------
Per
Amount Share
--------- --------
Net Loss Per Above $(26,395) (0.55)
Derivative Loss 5,359 0.11
Hedge Accounting Loss (545) (0.01)
--------- --------
Net Loss as Adjusted $(21,581) (0.45)
========= ========
ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET DATA
(Unaudited, Dollars in thousands)
Difference
October 2006 vs
October 31, October 31, October 2005
2006 2005 Amount Percent
----------- ----------- --------- -------
ASSETS
Current Assets:
Cash and Cash
Equivalents $50,396 $40,361 $10,035 24.9%
Merchandise Inventories 1,188,701 1,007,244 181,457 18.0%
Other Current Assets 106,796 86,900 19,896 22.9%
----------- ----------- --------- -------
Total Current Assets 1,345,893 1,134,505 211,388 18.6%
Property and Equipment, Net 297,771 283,638 14,133 5.0%
Goodwill, Net 96,859 93,361 3,498 3.7%
Other Assets 28,764 33,153 (4,389) -13.2%
----------- ----------- --------- -------
Total Assets $1,769,287 $1,544,657 224,630 14.5%
=========== =========== ========= =======
LIABILITIES AND
STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts Payable and
Accrued Liabilities $471,522 $379,840 $91,682 24.1%
Deferred Tax Liability,
Net 59,429 56,373 3,056 5.4%
----------- ----------- --------- -------
Total Current Liabilities 530,951 436,213 94,738 21.7%
Non-current Liabilities 18,740 35,920 (17,180) -47.8%
Non-current Tax Liability,
Net 7,803 13,966 (6,163) -44.1%
Long-term Debt 397,321 270,200 127,121 47.0%
Long-Term Accrued Rent 32,402 31,052 1,350 4.3%
Commitments and
Contingencies
Stockholders' Investment:
Common Stock 482 531 (49) -9.2%
Additional Paid-In
Capital 115,864 91,171 24,693 27.1%
Accumulated Other
Comprehensive Income 34,852 30,374 4,478 14.7%
Accumulated Earnings 782,464 731,576 50,888 7.0%
Deferred Compensation (1,592) (1,110) (482) 43.4%
----------- ----------- --------- -------
932,070 852,542 79,528 9.3%
Treasury Stock (150,000) (95,236) (54,764) 57.5%
----------- ----------- --------- -------
Total Stockholders'
Investment 782,070 757,306 24,764 3.3%
----------- ----------- --------- -------
Total Liabilities and
Stockholders' Investment $1,769,287 $1,544,657 $224,630 14.5%
=========== =========== ========= =======
CONTACT: Zale Corporation
David H. Sternblitz, 972-580-5047
Vice President and Treasurer