AP News

Zale shares plunge on 1Q loss

Zale Corp.'s shares plunged Wednesday after the jewelry retailer reported a larger-than-expected loss for its fiscal first quarter.

THE SPARK: Zale reported late Tuesday that it lost $28.3 million, or 88 cents per share, for the quarter that ended Oct. 31. That was an improvement from a year-ago loss of $31.9 million, or 99 cents per share. But it was worse than the loss of 68 cents per share that analysts polled by FactSet were expecting.

Revenue rose 1.8 percent to $357.5 million. Analysts were expecting higher revenue of $365.6 million.

THE BIG PICTURE: Jewelry store sales fell sharply during the recession and have yet to make a marked comeback, given the uncertain economy. While consumers will occasionally increase spending on jewelry, it remains a discretionary purchase that many are avoiding.

Zale runs Zales and Gordon's jewelry stores in the U.S., and People's Jewellers and Mappins Jewellers in Canada. It also operates Piercing Pagoda kiosks.

The company expects to report a profit for 2013 and said Wednesday that it is still on pace to meet that goal.

THE ANALYSIS: Citi analyst Oliver Chen said he expects some key sales measures to grow as it improves its product lineup. It also has room to expand its operating margins and improve its market share. He reiterated a "Buy" rating on the company's shares.

SHARE ACTION: Shares fell $2.16, or 29 percent, to $5.28 in midday trading. by midmorning. Its shares peaked for the past year at $7.66 just over a week ago. They fell as low as $2.18 on May 21.

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