Zale Corporation (
ZLC)
Q3 2009 Earnings Call Transcript
May 27, 2009 9:00 a.m. ET
Executives
David Sternblitz – Vice President & Treasurer
Neal Goldberg – President & Chief Executive Officer
Cynthia T. Gordon – Senior Vice President & Controller
Analysts
Rick Patel – Bank of America/Merrill Lynch
William Armstrong - CL King & Associates
Georg Venturatos - Johnson Rice & Company L.L.C.
Tia Quo – Telsey Advisory Group
Presentation
Operator
Good morning. My name is Cynthia and I will be your conference operator today. At this time, I would like to welcome everyone to the Zale Corporation third quarter fiscal 2009 earnings release 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, please 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. I would now like to turn today’s conference over to Mr. David Sternblitz, Vice President and Treasurer. Please go ahead, sir.
David Sternblitz
Thank you, Cynthia. Good morning and thank you for joining us for our third quarter 2009 conference call. I am David Sternblitz, as Cynthia said, Vice President and Treasurer of Zale.
With me on the call today are Neal Goldberg, Chief Executive Officer; Cynthia Gordon, Senior Vice President, Controller and Interim CFO; Theo Killion, President; Gil Hollander, Executive Vice President and Chief Sourcing and Supply Chain Officer; William Acevedo, Executive Vice President and Chief Stores Officer; and Mary Kwan, Executive Vice President and Chief Merchandising Officer.
Before I 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 the future goals, plans, and objectives. These forward-looking statements are not guarantees of future performance, and a variety of factors could cause 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 and our Quarterly Report on Form 10-Q, for the quarter ended January 31, 2009.
In addition, we will 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 the Shareholder Information tab.
I would now like to turn the call over to Neal.
Neal Goldberg
Thank you, David. Today, I’d like to briefly review our third quarter results and talk about where we are as we prepare to finish fiscal 2009.
Our key goals coming into the quarter were two-fold, one strengthen and stabilize the foundation of the business while two, starting to recapture the gross margin we lost from our promotional stance during holiday.
We accomplished these goals as gross margin returned to above 50% without a significant drop in same-store sales trends from the second quarter 2009. We generated positive free cash flow for the period with debt levels being reduced to approximately $60 million from the second quarter.
The Valentine’s Day period was stronger than the remainder of the quarter. The comp decline in Q3 was against last year’s increase of 5.8%. As you will recall, in March of 2008 we launched an aggressive clearance strategy to permanently liquidate $100 million of non-go forward merchandise.
