FINANCE

Zales posts larger Q4 on charges and sales declines

BY CSA STAFF

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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Office retail results indicate weak business climate

BY CSA STAFF

Office Depot and OfficeMax reported a drop in third-quarter sales but eked out profits, thanks to expense control and a focus on sales in profitable categories.

At OfficeMax, same-store sales declined 11.5% and total retail segment sales decreased 11% to $923 million. Operating profits fell slightly to $28.4 million from $29.1 million. However, a reduction in expenses enabled the company to increase its operating margin rate to 3% of sales from 2.8% the prior year. The company ended the quarter with 1,010 stores in its retail division, consisting of 932 units in the United States and 78 stores in Mexico.

“While continued lower sales levels strained our profitability this quarter, we managed to mitigate the impact by reducing costs and improving our operations,” said Sam Duncan, OfficeMax chairman and CEO. “Our relentless focus on implementing disciplined growth initiatives, differentiating our business and increasing our productivity continue to significantly benefit our performance.”

Despite that assertion, the OfficeMax missed analysts’ earning per share expectations by a wide margin, reporting a seven cents a share profit that was half of what analysts were expecting.

Profit were also hard to come by at Office Depot as top line sales growth was weak. Office Depot said sales at its North American retail division declined 18% to $1.3 billion due to 117 fewer stores and a 14% same-store sales decline. Despite the reduced sales volume, the division grew operating profits to $35 million compared to $12 million the prior year due in part to a conscious effort to reduce what it called, “unacceptable margin promotions in select categories.” Reduced expenses, lower asset impairment charges and improved inventory management also contributed to improved profitability.

“We are pleased with both our operating results and cash flow performance in the third quarter,” said Mike Newman, Office Depot’s CFO. “We exceeded our expectations in the quarter as a result of strong execution across the entire enterprise.”

Office Depot reported a loss of eight cents a share, excluding special items, which exceeded analysts’ estimates for a loss of 10 cents a share.

Office Depot ended the quarter with 1,158 stores in the U.S. and Canada.

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Food Lion, Kysor//Warren introduce innovative refrigeration

BY CSA STAFF

COLLEGE PARK, Ga. Food Lion and refrigeration manufacturer Kysor/Warren unveiled the grocery industry’s first cascading refrigeration system with naturally occurring carbon dioxide to keep frozen and fresh foods cold.

Food Lion demonstrated the system during an event held for industry peers and members of the U.S. Environmental Protection Agency’s GreenChill Advanced Refrigeration Partnership, a cooperative alliance working to reduce the use of ozone-depleting gases and curb greenhouse gas refrigerant emissions. The College Park store is Food Lion’s fourth GreenChill advanced refrigeration store and its third store to incorporate the use of CO2, which reduces the amount of refrigerants needed to keep products cool or frozen by more than 30%.

The system is Food Lion’s first “cascading” CO2 refrigeration cycle, which uses a single system and just one condensing unit to refrigerate and freeze foods. Before Kysor//Warren developed this system, grocers incorporating CO2 refrigeration systems needed two condensing units as well as a freezer-specific system and a refrigeration, medium temperature, specific system. This is Kysor//Warren’s first CO2 advanced refrigeration system in a retail grocery store setting.

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