Zale Posts Strong Valentine sales, Beats Expectations

Jewelry retailer Zale Corp. (ZLC) Friday said Valentine's Day sales were strong, signaling good results in the current quarter and lifting its shares 10 percent.

The company also said earnings for the second quarter ended Jan. 31 rose to $99.2 million, or $1.91 per share, from $97.3 million, or $1.83 per share, a year earlier.

Wall Street analysts on average had forecast $1.89 per share, according to Reuters Estimates.

Sales at stores open at least a year, a key measure of retail performance, fell 0.6 percent, in line with the company's revised outlook in January.

Total revenue rose 2.5 percent to $972 million. The average forecast from analysts polled by Reuters Estimates was $968.71 million.

Zale, which operates in the United States, Canada and Puerto Rico as well as on the Internet, lowered its earnings estimates last month. It said holiday sales were weaker than expected, specifically at its core Zales Jewellers division (search), which caters to moderate-income customers.

But in a conference call with analysts, Chief Executive Mary Forte said the company's brands continued to show improvement, including Zales, which posted a rise in same-store sales over the Valentine's Day period.

"It was already established that the Zale division did not perform to plan (in the second quarter)," said Jefferies analyst Robin Murchison. "What drives the third quarter is Valentine's Day, and management said that they were happy with the Valentine's Day business, including results in the Zale division."

Murchison said it was important that the company's largest division was able to reverse a same-store sales decline in the second quarter with an increase in the third quarter.

Zale, whose brands also include Bailey Banks & Biddle (search), Gordon's and Piercing Pagoda, said it was sticking with its forecasts for the third and fourth quarters.

The Dallas company said it expected an increase of 2 percent to 3 percent in same-store sales and earnings per share of 25 cents to 26 cents in the third quarter. For the fourth quarter, Zales said it was still looking at a same-store sales rise of 2.5 percent to 3.5 percent, with earnings at 14 cents to 15 cents a share.

Zale shares were up $2.70 at $29.65 in New York Stock Exchange (search) trade, where it was the second-biggest percentage gainer.