Zale Second-Quarter Profit Up Less Than 1%

Zale , the jewelry retailer, said fiscal second-quarter profit rose less than 1%, weighed down by one-time charges and flat revenue.

Profit for the quarter ended Jan. 31 was $88.1 million, or $1.80 a share, compared with $87.8 million, or $1.78 a share, during the same period last year.

Excluding charges for adjustments to derivative accounting, as well as for a change in how revenue is recognized for jewelry protection plans sold, net income totaled $1.94 a share in the latest period, compared with last year's adjusted profit of $1.96 a share.

Revenue grew 1% to $1 billion from $993.7 billion a year ago, which excludes results of the Bailey Banks & Biddle stores that were closed during the second quarter of 2006.

Analysts polled by Thomson Financial expected net income of $1.89 a share on higher revenue of $1.02 billion.

Same-store sales, or sales in stores open at least one year, a key measure of retail performance, grew 1.4% during the quarter.

The company said it did not reach original expectations for the quarter but is "pleased" with its first same-store sales increase in three years. Results were helped by expanded offerings in diamond and bridal jewelry categories, Zale said.

"While we gave back margins due to aggressive pricing and increased promotional activity at holiday, in January we changed our focus to maximizing gross profit dollars," said CEO Betsy Burton.

Zale also said the impact of accounting for gold and silver contracts increased profits by $2.5 million, or 5 cents per share, and the company also benefitted from expanding its jewelry protection plan sold to customers to cover the lifetime of the product rather than the two-year period previously covered.