Zale Earnings Preview

Zale (NYSE: ZLC  ) beat estimates by $0.18 last quarter and investors are hoping it can beat them again. The company will unveil its latest earnings on Wednesday, August 31. Zale is a specialty retailer of fine jewelry. It operates approximately 1,218 specialty retail jewelry stores and 672 kiosks located mainly in shopping malls throughout the United States of America, Canada, and Puerto Rico.

What analysts say:

• Buy, sell, or hold?: Analysts think investors should stand pat on Zale with analysts unanimously rating it hold. Analysts don't like Zale as much as competitor Blue Nile overall. Two out of 13 analysts rate Blue Nile a buy compared to zero of three for Zale. While analysts still rate the stock a hold, they are a little more optimistic about it compared to three months ago.
• Revenue Forecasts: On average, analysts predict $360.4 million in revenue this quarter. That would represent a rise of 4.5% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is a loss of $1.12 per share. Estimates range from a loss of $1.18 to a loss of $1.06.

What our community says:
Most CAPS All Stars are skeptical of ZLC prospects, with 64.9% assigning it an "underperform" rating. The community is split on the stock, with 46% Fools giving it an "outperform" rating and 54% an "underperform" rating. Fools are skeptical of Zale and haven't been shy with their opinions lately, logging 199 posts in the past 30 days. Zale's bearish CAPS rating of one out of five stars falls short of the Fool community sentiment.

Management:
The company's revenue has now risen for two straight quarters.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters:

Quarter	Q3	Q2	Q1	Q4
Gross Margin	50.1%	50.3%	50.5%	52.7%
Operating Margin	(1.3%)	7.0%	(12.8%)	(9.7%)
Net Margin	(2.2%)	4.3%	(29.9%)	(8.3%)

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