* Q4 loss/shr $0.89 vs loss $2.81 last year
* Q4 same-store sales down 2.1 pct
* Q4 gross margins improve 6.3 pct
* Shares down 3.7 pct
(Recasts, adds company comment, background, share activity,
By Emily Stephenson
CHICAGO, Sept 27 Jeweler Zale Corp ZLC.N said
quarterly sales fell as consumers cut back on lower-priced
jewelry and the retailer continued to lose market share,
sending its stock down 3.7 percent.
The company, which operates the Zales chain in the United
States and Peoples Jewellers in Canada, on Monday reported a
narrower loss for the fiscal fourth quarter as margins expanded
on lower costs and fewer merchandise discounts.
But sales fell 3.4 percent to $345.0 million, and sales at
stores open at least a year dropped 2.1 percent. Zale has been
contending with sharp sales declines for several years and has
been losing market share to Kay Jewelers parent Signet Jewelers
"The decrease in revenues ... is primarily due to the
decline in comparable store sales and year-over-year store
closures," Zale Chief Executive Theo Killion said in a
conference call with analysts.
He said gross margins improved for the quarter to 52.7
percent from 46.4 percent a year earlier due to lower
Zale reported a net loss of $28.5 million, or 89 cents per
share, for the quarter, ended July 31, compared with a loss of
$89.8 million, or $2.81 per share, a year earlier.
Signet, Zale's most direct competitor in the "middle"
jewelry market -- which falls between discounters like Wal-Mart
Stores Inc (WMT.N) and high-end jeweler Tiffany & Co (TIF.N) --
reported U.S. same-store sales up 5.9 percent in its most
recent quarter. [ID:nN26181832]
Much of Signet's same-store sales gains last quarter come
from a surge at its higher-end Jared chain, while Tiffany
missed sales expectations largely because of soft sales of
items costing less than $500.
Zale last week reached an agreement with Citibank, a unit
of Citigroup Inc (C.N), under which the bank would continue
issuing store credit cards to the jeweler's customers for an
initial five-year term, with automatic renewals for successive
two-year terms, effective Oct. 1. [ID:nN24193906]
Roughly 40 percent of Zale's U.S. sales are made on those
Killion said the company could not provide financial
guidance for the current quarter, but he said the agreement
with Citibank puts Zale in a better position going into the
Zale, whose liquidity problems during the 2009 holidays
forced it to cancel orders, delay payments to vendors and cut
advertising, will go up against Signet's ramped-up advertising
campaign ahead of the holidays.
Zale plans to increase spending slightly for television
advertising, CFO Matt Appel said. He would not give details.
The company recently said it had agreed to pay Z Investment
Holdings, an affiliate of Golden Gate Capital, $25 million to
eliminate the minimum consolidated EBITDA covenant under its
Shares of Zale were down 3.7 percent at $2.11 in
late-morning trade on the New York Stock Exchange.
(Reporting by Emily Stephenson in Chicago; additional
reporting by Phil Wahba in New York and Abhishek Takle in
Bangalore; editing by John Wallace)