Zale Corporation (ZLC)
Q1 2009 Earnings Call Transcript
November 25, 2008 9:00 p.m. ET

Executives

David Sternblitz – Vice President & Treasurer
Neal Goldberg - President & Chief Executive Officer
Rodney Carter - Executive Vice President, Chief Administrative Officer & Chief Financial Officer
Gilbert Hollander - Executive Vice President and Chief Sourcing and Supply Chain Officer

Analysts

Lorraine Maikis - Merrill Lynch & Co.
Adrienne Shapiro – Goldman, Sachs & Co.
Bill Armstrong – C.L. King & Associates
Janet Kloppenburg - JJK Research
Everin Koppelman – JP Morgan
Tim Rankin – Blue Harbor Group

Presentation

Operator

Good morning. My name is Laurie and I will be your conference operator. At this time, I would like to welcome everyone to the Zale Corporation first quarter fiscal 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press “*” then the number “1” on your telephone keypad. If you have already done so press the “#” sign now, then press “*1” again to ensure your question is registered. If you would like to withdraw your question press the “#” key. Thank you.

I''d now like to turn today’s call over to David Sternblitz, Vice President and Treasurer. Please go ahead sir.

David Sternblitz

Good morning and thank you for joining us for our first quarter 2009 conference call. I am David Sternblitz, Vice President and Treasurer of Zale Corporation. With me on the call today are Neal Goldberg, Chief Executive Officer; Rodney Carter, Executive Vice President, Chief Administrative and Chief Financial Officer; Theo Killion, President; Gil Hollander, Executive Vice President and Chief Sourcing and Supply Chain Officer and Cindy Gordon, Senior Vice President, Corporate Controller.

Before we begin, I''d like to review the Safe Harbor. Our commentary and responses to your questions on this conference call will contain forward-looking statements including statements relating to our future goals, plans and objectives. These forward-looking statements are not guarantees of future performance and a variety of factors could cause our actual results to differ materially from the anticipated or expected results expressed in these forward-looking statements.

Information concerning some of the factors that could cause actual results to differ materially from those contained in the forward-looking statements is available in our Annual Report on Form 10-K for the year ended July 31, 2008.

In addition, we may present non-GAAP financial information on this call. For a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to today''s earnings release which can be found on our corporate website www.zalecorp.com under Financial Information and then News Releases.

I would now like to turn the call over to Neal.

Neal Goldberg

Thank you very much David. Today, I’d like to review our first quarter results, discuss progress we have made against our initiatives which resonate now more than ever given the environment, and finally I would conclude with our plans to execute holiday.

For the quarter comp store sales were down 3.7%. Performance weakened as we moved through the quarter with October comps down over 9%. Q1 EPS adjusted for total warranty sales was a loss of $1.33. While the trends in our U.S. mall stores were challenging, several of our businesses continued to perform well including Piercing Pagoda, E-Commerce and Canada.

Though the national economic environment is challenging, we have continued to deliver strong performance on both store operations and cost control. The disciplines that we began last year are more important than ever. Focusing on our value-oriented customer with a price appropriate assortment, operational efficiency in our supply chain and stores, and most importantly in this climate the financial rigor of aggressively managing our cash and capital expenditures positions us well for the current environment.

While we are disappointed that we have yet to realize the full contribution from these initiatives we are even more confident now that these actions are right for the business today as well as tomorrow. Allow me to briefly review actions we have taken and their significance in the current environment.