(Reuters) - Zale Corp ZLC.N on Thursday posted a better than expected holiday quarter profit, as sales rose at its flagship chain and it cut selling and administrative costs.
But the mid-tier specialty jeweler said the combination of the East Coast blizzard at the start of February, higher payroll taxes that have hurt consumers’ take-home pay and a delay in U.S. tax refunds have hurt business this month, with comparable sales down by a “mid-single digit” percentage so far.
Shares were down 2.7 percent to $4.25 in morning trade after rising as high as $4.86 earlier in the session.
On a conference call, top executives said that “very weak” February sales were due to factors beyond their control and that business has picked up since Valentine’s Day, one of the most important occasions of the year for U.S. jewelers.
“Absolutely the guest showed up and shopped with us over the Valentine’s Day selling period,” Chief Executive Theo Killion said.
Net profit rose to $41.2 million, or $1.02 per share for the second quarter ended January 31, compared with $28.8 million or 77 cents per share a year earlier. That was 3 cents better than Wall Street analysts were expecting, according to Thomson Reuters I/B/E/S.
Zale restated its forecast that it will return to profit for the fiscal year ending in late July. Zale has not had a profitable year since its fiscal 2008.
Selling, general and administrative expenses were down to 41.6 percent of sales, from 42.5 percent a year earlier, and the company continued to benefit from debt refinancing last year which lowered its interest expense.
Same-store sales rose 2.8 percent, led by a 3.6 percent jump at Zales and Zales Outlets, its biggest business by far.
In Canada, where it operates Peoples Jewelers, same-store sales rose 3.8 percent. But because of unfavorable exchange rates, that came to a 0.5 percent increase in U.S. dollar terms.
At its Piercing Pagoda chain of mall-based kiosks, which generate about one-sixth of company revenues, same-store sales rose 1 percent.
The company said overall revenue rose 1 percent to $670.8 million.
Reporting by Phil Wahba in New York; Editing by Gerald E. McCormick and Sofina Mirza-Reid