Financial Reporting

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Zale expects to report financials Oct. 29

September 22, 2009

Irving, Texas--After twice delaying the reporting of its financials, Zale Corp. now expects to report results by Oct. 29, "although this date may change if unforeseen circumstances arise," according to a filing made on Friday with the Securities and Exchange Commission (SEC).

The SEC filing states that the company's previously filed financial statements for fiscal years 2008 and 2007 contain errors and "should no longer be relied upon."

Because of this, the company plans to restate its financials for fiscal year 2008 and interim periods in 2008 and 2009, and will present these results in its annual report for the fiscal year ended July 31, 2009.

Zale originally was slated to announce financial results for the fiscal year 2009 on Sept. 2. This date was then pushed to Sept. 9, before being suspended indefinitely.

The restatement, according to the SEC filing, pertains to the following issues:

A significant portion of prepaid advertising costs should have been recorded as expense. Prepaid advertising reflected in company balance sheets as of July 31, 2008 and 2007 totaled about $23 million and $18 million respectively, the filing states.

Certain adjustments aggregating approximately $9 million on a pre-tax basis, including a charge related to an inter-company accounts receivable associated with the company's wholly owned insurance subsidiaries, a charge related to certain depository bank account reconciliations and a benefit related to personal property tax reserves. The SEC filing states that in addition, a charge of about $4 million will be recorded in fiscal 2008 related to federal income taxes resulting from the expiration of net operating loss carryforwards.

Zale last reported earnings on May 27.

In August, the company announced it had closed a total of 191 underperforming locations--160 stores and 31 kiosks--in calendar year 2009, leaving it with a total of 1,931 locations.

It remains the largest retail chain in North America by store count and recorded $2.1 billion in sales in 2008, according to National Jeweler's 2009 "The State of the Majors" report.
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