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Zale reports Q2 net income grew less than 1% to $88.1 million, or $1.80/share, on revenue growth of 1% to $1b. Same store sales were positive for the first time in three years, up 1.4%, but guidance for Q3 is below analysts' estimates. Adjusted EPS totaled $1.94, short of the $1.96 last Q2, but ahead of analysts' average estimate of $1.89. Revenue however, came in short of analysts' $1.02b estimate.Zale-ZLC-1yr-chart-02-20-07 Zale said it expects Q3 same store sales to decline 2 to 3% and EPS flat to $0.04/share. Analysts polled by Thomson were expecting $0.25/share. CEO Betsy Burton comments, "In the second half, we will continue maximizing gross profit dollars as well as focus on expense reduction, particularly those investments in payroll and marketing that did not generate sufficient sales gains to justify."

Sources: Press release, BusinessWeek, Forbes-AP
Commentary: Earnings Preview: Zale CorporationZale Blames Poor Q1 Earnings On Derivative Accounting For Precious MetalsZale Corp Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Zale Corp (NYSE:ZLC). Competitors: Tiffany & Co (NYSE:TIF), Sterling Jewelers -- owned by Signet Group plc (NYSE:SIG), Helzberg Diamonds -- owned by Berkshire Hathaway (NYSE:BRK.A)

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Source: Zale: Earnings Up Slightly, Same Store Sales Seen Slipping in Q3