"Our plan has been to reduce the number ofunderperforming stores mostly through leaseexpirations, but we felt it necessary to acceleratethis process, allowing us to focus capital, inventoryand other resources on the most appropriate andproductive stores," said Zale Corp.'s president and CEOMary L. Forte during the company's fourth quarterfiscal 2005 earnings conference call.
"While the decision to close these underperformingstores was a difficult one, the net effect from theclosings will be a stronger Bailey Banks & Biddlebrand," Forte said. The chain will post a $13 millioncharge in 2006 for the closings, an impact of 25 centsper diluted share.
Other brands owned by the company, including Zales Jewelers,Zales Outlet, Gordon's Jewelers, Peoples Jewellers,Mappins Jewellers and Piercing Pagoda, didn't shineduring the fourth quarter fiscal 2005.
During the quarter, the fine jewelry retailer's profitplunged nearly 41% to $4.1 million or 8 cents perdiluted from $6.9 million or 13 cents per dilutedshare for the same period last year. The chainattributes the decrease to poor performance for itscore brand, Zale's.
The company introduced a new merchandizing strategythis month in hopes of improving Zale's overallperformance. The new merchandise includes aproprietary collection, as well as improved qualityand value, Forte said.
During the quarter, the chain adopted new financialaccounting standards. The new accountingprocedures, which require the expensing of stock-compensation programs, is expected to reduce earningsper diluted share by roughly 10 cents in fiscal 2006.For fiscal year 2006, Zale Corp. expects revenuegrowth of 5% to 7%; however, the revenue expectationsdo not reflect the impact of the Bailey Banks & Biddlestore closings. The chain also expects same-storesales increases of 2.5% to 3.5%.
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