Zale's 3Q losses widen as inventory is reduced

Third-quarter losses totaled $16.8 million, or 40 cents per share, compared with $4 million, or 8 cents per share, in the prior year. Excluding income from discontinued operations, quarterly losses totaled $17.4 million, or 42 cents per share, compared with a loss of $5 million, or 10 cents per share, a year ago.

Quarterly revenue rose 6 percent to $476.7 million, from $449 million in the third quarter of 2007.

Analysts surveyed by Thomson Financial forecast an adjusted loss of 42 cents per share on $457.9 million in revenue.

Zale's third-quarter same-store sales jumped 6 percent. Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

In February, after reporting that second-quarter profit dropped 31 percent, Zale announced an initiative to permanently reduce inventory and make the stores more appealing to price-sensitive customers. Zale said the goal was to achieve a $100 million reduction in inventory in the second half of 2008, which was expected to have a 500 basis point negative impact on gross margin.

Zale said its strategy exceeded expectations in the third quarter. The company liquidated $55 million of inventory with a 460 basis point reduction in gross margin.