Zale Reports Third Quarter Fiscal 2009 Results

* Comparable Store Sales Down 20% for the Third Quarter
* Third Quarter Gross Margin Increases to 50.1%
* SG&A Down $22 Million Compared to Prior Year
* Debt Reduced $57 Million During the Third Quarter

DALLAS--(Business Wire)--
Zale Corporation (NYSE: ZLC), a leading specialty retailer of fine jewelry in
North America, today announced a net loss from continuing operations of $23.2
million, or $0.73 per share, compared to a loss of $17.4 million, or $0.42 per
share, for the third quarter ended April 30, 2009 and 2008, respectively. As
compared with the prior year, earnings per share were negatively impacted by
$0.17 related to the 10 million reduced outstanding share count.

Revenues for the third quarter of fiscal 2009 were $379 million as compared to
$477 million for the prior period, a decrease of 20.5%. During the quarter
comparable store sales decreased 20.0% as compared to an increase of 5.8% for
the 2008 period. The prior year`s results were positively impacted by a
clearance initiative that permanently reduced inventory by $100 million. The
Company achieved a gross margin on sales during the third quarter of fiscal 2009
of 50.1%, compared to 47.5% the prior year. Overall results were impacted
positively by a reduction of aggregate selling, general and administrative
expense by $22 million compared to the prior year, primarily resulting from the
impact of cost reductions previously implemented by the Company. The Company is
currently in the process of implementing additional reductions in operating
costs including realigning its rent structure with sales trends, closing
underperforming stores, renewing leases that offer the best returns and
negotiating an efficient exit from its Bailey, Banks and Biddle contingent
liability.

As of April 30, 2009, the Company had outstanding debt of $333 million, a
reduction of $57 million from the second quarter of fiscal 2009.

"Our key goals coming into the quarter were to strengthen and stabilize the
foundation of the business while recapturing the gross margin we lost from our
promotional stance during Holiday," commented Neal Goldberg, Chief Executive
Officer. "We accomplished these goals as we generated positive free cash flow
for the period with debt levels being reduced approximately $57 million from the
second quarter and gross margins returning to above 50%."

Mr. Goldberg concluded, "While we have taken important steps to creating a more
efficient business model, we are up against difficult same store sales
comparisons due to the clearance initiative through September 2009."

A conference call will be held today at 9:00 a.m. Eastern Time. Parties
interested in participating should dial 800-679-2671 or 706-643-7467 five
minutes prior to the scheduled start time. A webcast of the call, as well as a
replay, will be available on the Company`s Web site at www.zalecorp.com. For
additional information, contact Investor Relations at 972-580-5047.

About Zale Corporation

Zale Corporation is a leading specialty retailer of diamonds and other jewelry
products in North America, operating more than 2,050 retail locations throughout
the United States, Canada and Puerto Rico, as well as online. Zale Corporation's
brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples
Jewellers, Mappins Jewellers and Piercing Pagoda. Zale also operates online at
www.zales.com and www.gordonsjewelers.com. Additional information on Zale
Corporation and its brands is available at www.zalecorp.com.

This release contains forward-looking statements, including statements regarding
estimated cost savings and inventory reductions, financial condition and
liquidity, as well as other strategies being implemented by the Company and
their future success. Forward-looking statements are not guarantees of future
performance and a variety of factors could cause the Company's actual results to
differ materially from the results expressed in the forward-looking statements.
These factors include, but are not limited to: if the general economy continues
to perform poorly, discretionary spending on goods that are, or are perceived to
be, "luxuries" may decrease; the concentration of a substantial portion of the
Company`s sales in three, relatively brief selling seasons means that the
Company`s performance is more susceptible to disruptions; most of the Company`s
sales are of products that include diamonds, precious metals and other
commodities, and fluctuations in the availability and pricing of commodities
could impact the Company`s ability to obtain and produce products at favorable
prices; the Company`s sales are dependent upon mall traffic; the Company
operates in a highly competitive industry; changes in regulatory requirements or
in the Company`s private label credit card arrangement with Citi may increase
the cost or adversely affect the Company`s operations and its ability to provide
consumer credit and write credit insurance; the Company`s contingent liability
with respect to lease obligations for Bailey Banks & Biddle stores sold by the
Company in November 2007 and acquisitions involve special risks, including the
possibility that the Company may not be able to integrate acquisitions into its
existing operations. For other factors, see the Company's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the fiscal year ended July 31, 2008. The Company disclaims any obligation to
update or revise publicly or otherwise any forward-looking statements to reflect
subsequent events, new information or future circumstances.

ZALE CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED FINANCIAL INFORMATION
(Unaudited, Dollars in thousands, except per share amounts)

Three Months Ended Nine Months Ended
April 30, April 30,
2009 2008 2009 2008

Revenues $ 379,110 $ 476,736 $ 1,422,630 $ 1,681,819
Cost of Sales 189,075 250,196 757,209 849,082
Gross Margin 190,035 226,540 665,421 832,737
% of Revenue 50.1 % 47.5 % 46.8 % 49.5 %
Selling, General and Administrative 209,509 231,660 713,003 752,777
% of Revenue 55.3 % 48.6 % 50.1 % 44.8 %
Cost of Insurance Operations 1,804 1,875 4,960 5,087
Depreciation and Amortization 14,453 14,887 44,498 45,117
Impairment Charges - - 13,221 1,632
Operating (Loss) Earnings (35,731 ) (21,882 ) (110,261 ) 28,124
% of Revenue -9.4 % -4.6 % -7.8 % 1.7 %
Interest Expense 1,929 1,769 8,633 9,590
(Loss)Earnings Before Income Taxes (37,660 ) (23,651 ) (118,894 ) 18,534
Income Tax (Benefit) Expense (14,465 ) (6,254 ) (26,776 ) 9,934
(Loss)Earnings from continuing operations (23,195 ) (17,397 ) (92,118 ) 8,600
Earnings from discontinued operations, net of taxes - 604 - 7,084
Net (Loss)Earnings $ (23,195 ) $ (16,793 ) $ (92,118 ) $ 15,684

Basic (Loss)Earnings Per Common Share:
(Loss)Earnings from continuing operations $ (0.73 ) $ (0.42 ) $ (2.89 ) $ 0.19
Earnings from discontinued operations $ - $ 0.02 $ - $ 0.16
Net (Loss)Earnings per share $ (0.73 ) $ (0.40 ) $ (2.89 ) $ 0.35

Diluted (Loss)Earnings Per Common Share:
(Loss) earnings from continuing operations $ (0.73 ) $ (0.42 ) $ (2.89 ) $ 0.19
Earnings from discontinued operations $ - $ 0.02 $ - $ 0.16
Net (Loss)Earnings per share $ (0.73 ) $ (0.40 ) $ (2.89 ) $ 0.35

Weighted Average Number of Common Shares Outstanding:
Basic 31,972 41,568 31,879 45,319
Diluted 31,972 41,568 31,879 45,414

Impact on GAAP Information from Deferred Revenue for the 3rd Quarter fiscal 2008, diluted:
Three Months Ended Nine Months Ended
April 30, 2008 April 30, 2008
Amount Per Share Amount Per Share
Net (Loss)Earnings from Continuing Operations, Per Above $ (17,397 ) $ (0.42 ) $ 8,600 $ 0.19
Change in deferred revenue 10,430 0.25 39,144 0.86
Net (loss)earnings from continuing operations, as adjusted $ (6,967 ) $ (0.17 ) $ 47,744 $ 1.05

Impact on GAAP Information from Special Items for the 3rd Quarter fiscal 2009, diluted:
Three Months Ended Nine Months Ended
April 30, 2009 April 30, 2009
Amount Per Share Amount Per Share
Net Loss from Continuing Operations, Per Above $ (23,195 ) $ (0.73 ) $ (92,118 ) $ (2.89 )
Store impairments - - 5,003 0.16
Goodwill Impairment - - 5,020 0.16
Tax Adjustments (a) (4,150 ) (0.13 ) 11,697 0.37
Loss before change in deferred revenue (27,345 ) (0.86 ) (70,398 ) (2.20 )
Change in deferred revenue 4,313 0.14 21,613 0.67
Net loss from continuing operations, as adjusted $ (23,032 ) $ (0.72 ) $ (48,785 ) $ (1.53 )

(a) Tax adjustments for the nine months ended April 30, 2009 relate to a valuation reserve on foreign tax credits resulting from our decision to revoke our APB 23 election during the second quarter of fiscal 2009. Tax adjustments for the three months ended April 30, 2009 include a benefit totaling $6.9 million related to a decrease in the estimated valuation reserve and a charge totaling $2.7 million related to the expiration of net operating loss carryforwards.

CONSOLIDATED BALANCE SHEET DATA
(Unaudited, Dollars in thousands)

Difference
April 30, April 30, April 2009 vs April 2008
2009 2008 Amount Percent
ASSETS
Current Assets:
Cash and cash equivalents $ 23,950 $ 67,648 $ (43,698 ) -64.6 %
Merchandise inventories 758,994 866,961 (107,967 ) -12.5 %
Other current assets 83,260 91,917 (8,657 ) -9.4 %
Total current assets 866,204 1,026,526 (160,322 ) -15.6 %

Property and equipment 708,632 713,513 (4,881 ) -0.7 %
Less accumulated depreciation and amortization (447,894 ) (427,445 ) (20,449 ) -4.8 %
Net property and equipment 260,738 286,068 (25,330 ) -8.9 %

Goodwill 87,454 105,011 (17,557 ) -16.7 %
Other assets 28,289 35,953 (7,664 ) -21.3 %
Deferred tax asset 54,642 3,963 50,679 1278.8 %
Total Assets $ 1,297,327 $ 1,457,521 $ (160,194 ) -11.0 %

LIABILITIES AND STOCKHOLDERS` INVESTMENT
Current liabilities:
Accounts payable and accrued liabilities $ 220,228 $ 287,236 $ (67,008 ) -23.3 %
Deferred tax liability 71,915 56,521 15,394 27.2 %
Total current liabilities 292,143 343,757 (51,614 ) -15.0 %

Long-term debt 332,800 269,106 63,694 23.7 %
Other liabilities 188,916 159,962 28,954 18.1 %

Contingencies

Stockholders` Investment:
Common stock 488 488 0 0.0 %
Additional paid-In capital 147,271 143,376 3,895 2.7 %
Accumulated other comprehensive income 18,217 53,356 (35,139 ) -65.9 %
Accumulated earnings 787,395 883,795 (96,400 ) -10.9 %
953,371 1,081,015 (127,644 ) -11.8 %
Treasury stock (469,903 ) (396,319 ) (73,584 ) -18.6 %
Total stockholders` investment 483,468 684,696 (201,228 ) -29.4 %

Total liabilities and stockholders` investment $ 1,297,327 $ 1,457,521 $ (160,194 ) -11.0 %

Non-GAAP Financial Measures and Reconciliations

This press release includes a presentation of earnings and earnings per share
for the three months and nine months ended April 30, 2009, as adjusted to
include deferred revenue under the lifetime jewelry plan and to exclude store
impairment charges, goodwill impairment charges and the impact of certain tax
adjustments. In addition, this press release includes a presentation of earnings
and earnings per share for the three months and nine months ended April 30,
2008, as adjusted to include deferred revenue under the lifetime jewelry plan.
Earnings and earnings per share, in each case as adjusted with respect to the
items described above, are not measures of financial performance under GAAP.
These measures should not be considered as alternatives to earnings and earnings
per share as computed under GAAP for the applicable period. Reconciliations of
these measures to earnings and earnings per share under GAAP are presented above
under "Consolidated Selected Financial Information."

Management uses earnings and earnings per share measures adjusted for certain
items as part of its evaluation of the performance of the Company. Since
management expects sales of lifetime jewelry protection plans to produce
recognizable income in future periods and considers sales of these plans to be
an important aspect of revenue production by stores, it considers earnings and
earnings per share, as well as sales and other performance measures, that have
been adjusted to reflect deferred revenue as important measures of sales efforts
and other operating performance. Since the store impairment charges, goodwill
impairment charges and certain tax adjustments are items that are expected to
occur in unpredictable amounts and with uncertain frequency in the future,
management excludes these items in evaluating current operating performance.
Further, the Company believes the adjusted earnings and earnings per share
measures provide useful information to investors because the items described
above had a significant impact during the applicable period and warrant special
attention on the part of investors.

This press release also includes a statement regarding "free cash flow" for the
three months ended April 30, 2009. Free cash flow is a non-GAAP financial
measure and is defined as cash flows from operating activities (in accordance
with GAAP) less net capital expenditures. Capital expenditures include additions
to property and equipment. The Company considers cash flows from operating
activities to be the most comparable GAAP financial measure.

The Company believes the presentation of free cash flow presents useful
information about the amount of cash generated from operations after making
capital investments to support growth initiatives. Free cash flow should not be
considered as an alternative to cash flows from operating, financing or
investing activities or as a measure of liquidity. Further, free cash flow does
not represent the total increase or decrease in the cash balance for the
period.

Reconciliation of GAAP Information to Non-GAAP basis for the 3rd Quarter fiscal 2009:
Three Months Ended
April 30, 2009
Amount
Net cash provided by operating activities $ 7,630
Payments for property and equipment (4,080 )
Free cash flow $ 3,550

Net cash provided by investing activities $ 341
Net cash used in financing activities $ (57,205 )

Zale Corporation
Investor Relations
David Sternblitz, Vice President and Treasurer, 972-580-5047
or
Rhett Butler, Manager of Investor Relations, 972-580-5047

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