February 21, 2013 / 3:23 PM / 5 years ago

UPDATE 1-Zale holiday quarter profit beats, but February sales slip

* February comparable sales down "mid-single-digit"
    * Repeats forecast of return to profitability in 2013
    * Shares down 2.7 percent

    By Phil Wahba
    Feb 21 (Reuters) - Zale Corp 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
    Net profit rose to $41.2 million, or $1.02 per share for the
second quarter ended Jan. 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
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