Earnings Preview: Zale faces tough fiscal 1st qtr

OVERVIEW: Jewelers have struggled as more consumers scale back discretionary spending in a weak economy. Tighter credit is also making it more difficult for shoppers to finance their purchases.

Zale has been making changes to overhaul its business. Earlier this year, Zale revealed plans to cut more than 200 jobs and close 105 stores to save more than $65 million a year.

Zale operates over 2,200 retail locations under brand names that include Zales Jewelers, Gordon's Jewelers, Piercing Pagoda, among others.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect a loss of 93 cents per share and sales of $381.9 million in the quarter.

ANALYST TAKE: Soleil Securities Group Inc. analyst Jeffery Stein, who rates Zale "Hold," said the company's share price has declined significantly over the past several months as conditions in the sector have worsened.

"While management has reduced costs and introduced new assortments, we believe that the current environment for high-ticket discretionary items has deteriorated and may not allow Zale to realize the margin improvement and expense leverage sought by its remerchandising and cost savings programs," Stein wrote.

Stein cut his share price target to $15 from $30, implying he expects shares to climb 40 percent from Friday's closing price of $9.07.

WHAT'S AHEAD: Analysts and investors are closely monitoring consumer spending and whether this will affect Zale's holiday season, when many jewelers typically record a large portion of sales.

STOCK PERFORMANCE: Zale shares climbed 32 percent during the quarter to finish trading at $25 on Sept. 30. The stock has fallen with the broader market since then, finishing Friday's trading at $7.85.