Wall Street falls, ends worst month since May 2012

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Zale posts first full-year profit since 2008, shares soar

By Phil Wahba

Wed Aug 28, 2013 11:18am EDT

n">(Reuters) - Zale Corp (ZLC.N) posted higher-than-expected fourth-quarter comparable sales on Wednesday, led by big gains at its flagship chain, and reported its first profitable fiscal year since the financial crisis in 2008.

Shares soared as much as 23.7 percent to $11.08, reaching their highest since November 2008, when the financial crisis decimated sales of mid-priced jewelry. The stock has nearly tripled since April.

For the new fiscal year, the company expects more revenue gains despite the expected closing of about 50 more stores as it continues to pare unprofitable locations. Zale has about 1,076 jewelry stores and operates Zales and Gordon's Jewelers among other chains.

Zale, which three years suffered a liquidity crunch after sales collapsed, said same-store sales, or sales at stores open at least a year, rose 5.6 percent overall. Sales increased 8.1 percent at its Zales stores, its biggest business by far.

Analysts expected a gain of 4 percent for the whole company, according to Thomson Reuters I/B/E/S.

That comes on top of an 8.3 percent companywide same-store sales increase in the year-earlier quarter.

Overall revenue rose 2.5 percent to $417.1 million in the quarter.

The company's turnaround began in 2010, when Zale got a $150 million lifeline from private equity firm Golden Gate Capital, and sales began improving.

Since then, Zale's business has gotten a lift from adding exclusive lines that offer higher margins. In 2012, Zale introduced Vera Wang Love, and this year it will expand its Celebration Fire collection to 600 stores from 220.

"This is an area for enormous growth in both margin and sales," Chief Executive Theo Killion told analysts on a conference call.

Last month, it signed a deal for branded credit cards with Alliance Data Systems Corp (ADS.N) that Zale said will offer it better terms than one with Citi. The program will begin no later than October 2015.

Zale has also been paying down debt, helping to lower interest expenses. Long-term debt fell to $410.1 million in the quarter from $452.9 million a year earlier.

The quarterly net loss narrowed to $8 million, or 25 cents per share, for the quarter ended July 31, from $19.7 million, or 61 cents per share, a year earlier. But Zale was still able to post a full-year profit.

In Canada, where Zale operates Peoples Jewellers and Mappins Jewellers, same-store sales rose 3.3 percent.

The stock was up $1.79, or 20 percent, to $10.75 in mid-morning trade.

(Reporting by Phil Wahba in New York; Editing by Jeffrey Benkoe)

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German private sector grows in August at strongest rate since January: PMI

Robots connect side parts on an Audi A3 light weight construction chassis at the production line of the German car manufacturer's plant in the Bavarian city of Ingolstadt April 11, 2013.

Credit: Reuters/Michaela Rehle

BERLIN | Thu Aug 22, 2013 3:32am EDT

BERLIN (Reuters) - Germany's private sector expanded in August at its fastest rate since January, a survey showed on Thursday, in a sign Europe's largest economy is back on track after a contraction late last year and a subdued start to 2013.

Markit's preliminary composite Purchasing Managers' Index (PMI), which measures growth in both the manufacturing and services sector and covers more than two-thirds of the economy, rose to 53.4 in August from 52.1 in July.

That was comfortably above the 50 threshold that separates growth from contraction and was helped by a surge in new work.

"It's an increasingly buoyant-looking picture, with manufacturing seeing its best performance for a couple of years, and alongside that there's an improving service sector, so exporters are doing well and the domestic economy is healing," said Chris Williamson, chief economist at Markit.

"I would expect to see some job growth come through in the coming months which should further cement the picture of a sustainable looking upturn," he added.

He said the PMI survey pointed to economic growth of around 0.4 percent in the third quarter, a slight slowdown after the bumper growth of 0.7 percent in the April-June quarter driven by strong domestic demand and weather-related catch-up effects.

The positive PMI reading chimed with recent data which has pointed to an upturn in Europe's powerhouse economy, including rising industrial orders, output and exports, falling unemployment and sentiment improving overall.

A sub-index from Markit showed the manufacturing sector expanding at its fastest rate in more than two years in August as output was above the 50 threshold for a fourth straight month. Backlogs of work also increased.

Factories continued to shed jobs but Williamson said this was a reflection of Germany's need to be competitive as Japan and the United Kingdom benefit from their weakened currencies rather than a cause for concern about the economic outlook.

Manufacturing firms benefited from a surge in new orders, which increased at their sharpest rate since May 2011. New contracts from abroad, which have suffered from weaker euro zone demand and a slowdown in Asia in recent months, shot up for the first time since February.

Manufacturers also got a boost from bigger margins thanks to rising factory gate prices and falling input prices. Service providers, on the other hand, suffered a squeeze on their margins as their costs rose more sharply than output prices.

A sub-index tracking the service sector showed business activity increasing at its fastest pace since February as new orders rose, albeit at a slower pace than in July.

Service providers' business expectations were in positive territory for the ninth month in a row, boding well for future business activity, and firms hired new staff for the second straight month.

- Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license.

To subscribe to the full data, click on the link below: http://www/markit.com/information/register/reuters-pmi-subscriptions

For further information, please phone Markit on +44 20 7260 2454 or email economics@markit.com

(Reporting by Michelle Martin; Editing by Hugh Lawson)

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