Zale 3Q same-store sales fall 20 percent

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Zale 3Q same-store sales fall 20 percent

By null

May 27, 2009

Dallas--Same-stores sales were down 20 percent in the third quarter of fiscal 2009 for Zale Corp., according to earnings released on Wednesday.

Overall sales totaled $379 million, down from $477 million in the third quarter of 2008, a 20.5 percent drop.

During a conference call for investors held on Wednesday morning, Zale President and Chief Executive Officer Neal Goldberg said the company's current financial performance for the third quarter compared with the third quarter of 2008--when same-store sales increased 5.8 percent--is distorted by the fact that the company was conducting large-scale clearance sales last year in an attempt to sell off $100 million of "non-go-forward merchandise."

"While highly successful to allow us to reach our goal of liquidating inventory, the clearance initiative does distort current performance due to the traffic and comp-store increases in the prior year," Goldberg said.

Goldberg added that an analysis of the trends shows that Zale's clearance initiative drove 10 percent of its same-store sales performance in the third quarter of 2008.

As part of its conference call on Wednesday, Zale also announced the hiring of Matthew W. Appel as executive vice president, effective today.

Appel will become chief financial officer on June 15, after the company files its Form 10-Q.

He replaces Cindy Gordon, Zale's current senior vice president, controller, who was serving as interim CFO.

Most recently, Appel served as vice president and CFO of ExlService Holdings Inc.

"Matt's broad range of experience in growth and turnaround companies makes him a great complement to our team," Goldberg said. "He is an experienced operator who has strong leadership and technical skills combined with deep expertise in strategic financial management. Matt will play an integral role as we capitalize on the opportunities ahead, as well as intensify the financial rigor we have brought to the business. I'd like to thank Cindy Gordon for her service as interim CFO and her continuing service as senior vice president, controller. She remains an important asset to the future success of our company."

Also mentioned during Zale's call on Wednesday was the issue of the leases it is liable for following its sale of Bailey Banks and Biddle to Finlay in late 2007.

As part of the deal at the time of the sale, Zale remains liable for the leases of the Bailey Banks and Biddle stores, some of which Finlay has begun closing.

Goldberg remained tight-lipped about the Bailey Banks and Biddle situation on Wednesday, saying only that negotiations are ongoing and more details will be available in the near future.

Zale operates a total of 2,050 units: 1,356 stores and 694 kiosks.

According to information provided during the call, Zale opened one store during the third quarter and closed 31. The chain opened no kiosks and closed seven.

Zale, which operates Zales Jewelers stores and Piercing Pagoda kiosks, as well as a number of regional brands, ranks as the largest North American jewelry retailer in terms of store count, according to National Jeweler's 2009 State of the Majors report.

It ranks as No. 3 on the State of the Major's list of $100 Million Supersellers, with $2.1 billion in watch and jewelry sales in 2008.

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