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Jewelry retailer Zale's Q1 same store sales drop 1.2%

Nov '05
Dallas based largest specialty jewelry retailer Zale Corporation that for the first quarter ended October 31, 2005, comparable store sales decreased 1.2 percent. Total revenues for the period were $427 million compared to last year's first quarter revenues of $423 million, an increase of 0.9 percent.

"Company is disappointed with these sales results," commented Mary L. Forte, President and Chief Executive Officer. "Delay in receipts of new merchandise related to the Zales repositioning resulted in lower than planned in-stock positions during the quarter. The considerable changes to their product offerings, along with the establishment of new vendor relationships, has temporarily extended the lead time of supplying merchandise to their stores. These inventory issues negatively impacted the performance at the Zales brand, which had a significant effect on their consolidated results.

In addition, the Company stated that the impact of the hurricanes on the quarter resulted in lost sales, which negatively affected earnings by approximately $0.03 per share.

In connection with the closing of approximately 30 Bailey Banks & Biddle stores that do not fit with the brand's long-term positioning in the luxury goods market, the Company expects to record, in its first fiscal quarter, an impairment charge of approximately $8 million, or $0.10 per share, in accordance with SFAS No 121, "Accounting for Impairment of Long-Lived Assets."

This impairment charge, being non-cash in nature, does not affect the Company's cash flows. The Company also incurred incremental markdown charges of approximately $0.01 per share related to the liquidation of inventory in a subset of these stores scheduled for closure.

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