2008 - Zale Corporation 2008 ANNUAL REPORT Zale Corporation...

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Zale Corporation 2008 ANNUAL REPORT
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Letter to our shareholders Dear Shareholders, Fiscal 2008 was a year of transition for our Com- pany. Our business had become just another mall jeweler with little differentiation. Instead of building the emotional equity that should be inherent in the jewelry business, we became primarily defined by the depth and frequency of our product promotions. Celebrations of love and happiness, for which our product is purchased, could not cut through the commoditized items and the overcrowded cases. Those realities, however, were juxtaposed against a group of talented employees, loyal customers and a we have such tremendous opportunity. To realize that opportunity, we quickly set to work defining and implementing a very focused plan with clear objectives for the back half of the fiscal year. We are pleased to report that we achieved those objectives and in some cases exceeded them, as will be described in further detail below. From a financial standpoint, we had a challenging start to fiscal 2008, which included a disappointing Holiday season. Even in a difficult year ending July 31, 2008, the Company reported essentially flat comparable store sales that benefited from an aggressive clearance strategy in the second half of fiscal 2008. We had operating cash flows of approxi- mately $137 million and capital expenditures of $85 million, resulting in $52 million free cash flow. Earnings from continuing operations in fiscal 2008 were $3.7 million or $0.09 per diluted share, compared to earnings of $48.1 million or $0.98 per diluted share in the prior year. For the year ending July 31, 2008, total warranty sales increased 12% to $121 million. Earnings continue to be impacted by the Company’s accounting method for its lifetime jewelry protection plan with deferred revenue growing an additional $79 million in fiscal 2008. Among our businesses, our Canadian brands stood out, generating double-digit comparable store sales increases that exceeded our sales and earnings plans. We have a dominant position in Canada and see even more market share opportunity through new assortments as well as additional store growth. In fiscal year 2008, we opened an additional 16 stores in Canada. Our E-Commerce business also continued to expand, exceeding $55 million in annual revenue and achieving over a 30% increase in sales for the year. We have seen significant improvements in traffic and conversion rates as we made creative changes to the site and enhanced functionality, increased marketing as well as expanded the assortment. We acquired over 215,000 new customers on-line in fiscal 2008, a 48% increase over the prior year. Our greatest progress in 2008, however, came in shaping and beginning to execute our strategic plan, which centers on leveraging Zale’s strength as the major “value” player in the jewelry industry. The plan consists of three parts: (1) re-engaging our core customer, (2) enhancing our operational effectiveness, and (3) maintaining financial rigor.
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This note was uploaded on 10/17/2011 for the course BUSI 3002 taught by Professor Marclyncheski during the Fall '11 term at Walden University.

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2008 - Zale Corporation 2008 ANNUAL REPORT Zale Corporation...

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