May 27, 2009 / 1:23 PM / 10 years ago

UPDATE 2-Zale loss wider than view, shares fall

* Q3 loss 73 cts/shr vs. Wall St. loss view 46 cts/shr

* Q3 sales down 20.5 percent

* Matthew Appel named CFO

* Shares down 18.3 percent (Adds details on sales, byline, updates share price)

By Aarthi Sivaraman

NEW YORK, May 27 (Reuters) - Zale Corp ZLC.N posted a wider-than-expected quarterly loss on Wednesday as the recession doused demand for jewelry, and its shares plunged 18.3 percent.

Jewelry stores like Zale and Signet Jewelers (SIG.N) and even upscale chain Tiffany & Co (TIF.N) have suffered as the economic slump has forced cash-strapped shoppers to spend mostly on essential items like food and avoid unnecessary purchases. Store-closing sales by bankrupt rivals has added to the pressure on jewelers.

Zale has been closing stores and liquidating some inventory as the struggling jewelry chain works to combat starkly weaker sales.

The company said its steps to clear out inventory through discounts would lead to a tough same-store sales comparison through September.

Zale’s net loss widened to $23.2 million, or 73 cents per share, in its fiscal third quarter that ended on Apr. 30, from a net loss of $16.8 million, or 40 cents per share, a year earlier.

Its loss of 73 cents per share was more than the average analyst expectation for a loss of 46 cents per share, according to Reuters Estimates.

A reduction in outstanding shares of about 10 million, when compared with last year, widened the loss per share by 17 cents, Zale said.

Sales fell 20.5 percent to $379.1 million, as sales at stores open at least a year fell 20 percent.

Zale said it reduced its outstanding debt by $57 million to $333 million as of Apr. 30. Its gross margin increased to 50.1 percent, compared to 47.5 percent a year earlier, as it reduced its selling, general and administrative expenses.

Separately, Zale named Matthew Appel as its chief financial officer as of June 15 to replace Rodney Carter, who left in January.

Zale shares were down at $4.12 on the New York Stock Exchange from their Wednesday close of $5.04.

Reporting by Aarthi Sivaraman; additional reporting by Martinne Geller, editing by Dave Zimmerman

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