News Release

-- Estimated $65 plus million in ongoing, annualized savings a majority of which is overhead spending. Approximately $5 million of savings are expected to be realized in the fourth quarter of fiscal 2008;

-- Organizational streamlining, primarily involving a reduction of the Company's headquarters staff by 225 filled and open positions or approximately 20%;

-- Anticipated total program cost, including severance-related benefits, of less than $4 million pre-tax, will be incurred largely in the Company's fiscal third quarter ending April 30, 2008;

-- A reduction of planned capital spending from an expected $85 million in fiscal 2008 to approximately $45 million in fiscal 2009;

-- Continued optimization of Company's store portfolio, including the closure of an additional 23 underperforming locations, bringing the total number of planned store closures to approximately 105 in fiscal 2008; and,

-- A $100 million reduction in inventory in fiscal 2008, which was announced previously. The decrease in inventory levels was based on a detailed review by category and item and the Company intends to make the reduction permanent.

Zale President and Chief Executive Officer Neal Goldberg said, "In order to improve Zale's overall performance and provide our value-oriented customer with an exceptional experience, it is essential that we reduce the Company's infrastructure costs, which have outpaced its sales growth since 2002. The program we are announcing today follows an extensive review, and will enhance our operational effectiveness significantly. It builds upon steps we have already taken to reduce redundancies, simplify processes and create a more agile company, such as the realignment of our merchandise and sourcing organizations."

"Creating a culture of cost discipline and financial rigor is vital to Zale's ongoing success. While we recognize that expense saves will help drive efficiencies in the near-term, our ultimate success will come from optimizing the balance between top-line growth, margin expansion and expense control. These actions are difficult for our entire organization but are important steps in order to connect us more closely to our customers," concluded Mr. Goldberg. "We thank our associates affected by these changes for their dedication, hard work and contributions."

Operating Savings Details

The Company eliminated approximately 140 filled and 85 open positions, representing approximately 20% of its Company's headquarters staff. As a result of this action, the Company expects to reduce corporate staff payroll by approximately $15 million, or 20%, per year, and non-selling field payroll by approximately $8 million. In addition, approximately $40 million of non-compensation expenses such as consulting, marketing, and travel are planned to be eliminated, representing 20% of such expenses, as well as $2 million related to distribution.

Reflecting this expense reduction, the Company expects to reduce SG&A as a percent of sales by approximately 250 basis points for fiscal 2009, as compared to the current fiscal year.

Capital Reduction and Store Closing Details

The Company's capital expenditures for fiscal 2009 are expected to be $45 million, a reduction of $40 million from the $85 million level the Company expects for the current fiscal year. Capital expenditure reductions will be realized primarily from more effective spending on store remodels, slower store growth in the near-term and a deceleration of information technology initiatives.

With the estimated $65 plus million in operating savings and $40 million in capital expenditure reductions, the Company expects a substantial increase in its free cash flow for fiscal 2009.

The store optimization component of the program involves the closure in fiscal 2008 of approximately 105 locations, of which 95 are underperforming and 50 are kiosks. These locations will close primarily as leases mature; as such, the Company expects to incur minimal exit costs. Zale intends to maintain this financial rigor as it evaluates its store portfolio on an ongoing basis. Even as the Company makes these reductions, it will continue to commit to needed and profitable investments in the existing store base, as well as dedicate its capital expenditures to brands offering greater strategic opportunity and higher return on investment. Zale expects to exit its fiscal year 2008, which ends July 31, 2008, with approximately 2,145 retail locations.

About Zale Corporation

Zale Corporation is a leading specialty retailer of fine jewelry in North America, operating throughout the United States, Canada and Puerto Rico in 2,167 retail locations as of January 31, 2008. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Zale also operates online at www.zales.com and www.gordonsjewelers.com. Additional information on Zale Corporation and its brands is available at www.zalecorp.com.

This release contains forward-looking statements, including statements regarding future results of operations and cash flows and the strategies being implemented by the Company and their future success, including expense and capital reductions. Forward-looking statements are not guarantees of future performance and a variety of factors could cause the Company's actual results to differ materially from the results expressed in the forward-looking statements. These factors include, but are not limited to: if the general economy performs poorly, discretionary spending on goods that are, or are perceived to be, "luxuries" may not grow and may even decrease; the concentration of a substantial portion of the Company's sales in three, relatively brief selling seasons means that the Company's performance is more susceptible to disruptions; most of the Company's sales are of products that include diamonds, precious metals and other commodities, and fluctuations in the availability and pricing of commodities could impact the Company's ability to obtain and produce products at favorable prices; the Company's sales are dependent upon mall traffic; the Company operates in a highly competitive industry; changes in regulatory requirements or in the Company's private label credit card arrangement with Citi may increase the cost or adversely affect the Company's operations and its ability to provide consumer credit and write credit insurance; acquisitions involve special risks, including the possibility that the Company may not be able to integrate acquisitions into its existing operations. For other factors, see the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended July 31, 2007. The Company disclaims any obligation to update or revise publicly or otherwise any forward-looking statements to reflect subsequent events, new information or future circumstances.

SOURCE: Zale Corporation

Zale Corporation
David H. Sternblitz, 972-580-5047
Vice President and Treasurer