Zales posts larger Q4 on charges and sales declines

Dallas Zale Corp. reported a significantly larger fiscal fourth-quarter loss on Friday, weighed down by hefty charges for closing stores and other items, and by a decline in sales at stores open at least a year.

The jewelry chain lost $89.8 million for the three months ended July 31, compared with a loss of $10 million a year earlier.

Revenue dropped 22% to $357.1 million from $456.2 million. Quarterly results included special charges of $70.8 million due to store closings and other items. The prior-year period benefited from special gains of $11 million.

CEO Neal Goldberg said the company had a difficult year, but expects things to pick up after closing more than 200 underperforming stores, lowering inventory and implementing cost control efforts.

“Our financial results for fiscal 2009 reflected the most difficult year in retailing in memory. Nonetheless, we believe we have positioned the business for much improved performance,” commented Goldberg in a statement. “We have streamlined our cost structure and closed over 200 underperforming locations. We have reduced and realigned inventories and increased our proprietary products and collections. We have emphasized discipline in pricing and promotional strategies, and training for our fine jewelry consultants. We are encouraged that fiscal 2010 to date reflects improved business performance, with sales reflecting the exit of various specialty jewelry competitors, as well as a strengthening economy and our own internal efforts.”

For the year, Zale reported a loss of $189.5 million, compared with a profit of $631 million in the previous year. Annual sales fell 17% to $1.78 billion from $2.14 billion.

Zale runs about 1,930 retail locations throughout the United States, Canada and Puerto Rico.

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