Zale Corporation Announces Results for the Holiday Selling Season.

DALLAS -- Zale Corporation (NYSE:ZLC), a leading specialty retailer of fine jewelry in North America, today reported that comparable store sales increased 2.3% for the combined months of November and December 2006, encompassing the entire holiday selling period. Total revenues for the two-month period were $905 million compared to $860 million last year, an increase of 5.2%. Last year's total revenues exclude the results of the Bailey Banks & Biddle stores that were closed and managed by an independent liquidator during the second fiscal quarter of 2006. Including the store closures, last year's total revenues for the two-month period were $873 million, which were exceeded this year by an increase of 3.7%.

The Company commented that while the Zales brand gained sales momentum, margins were below expectation due to more aggressive pricing and increased promotional activity. In addition, the Gordon's and Piercing Pagoda brands delivered comparable store sales decreases, offset by strong performances in Zale Canada, Zales Outlet, and ZLC Direct. As a result, the Company indicated that it now expects comparable store sales increases for the second fiscal quarter ending January 31, 2007, of approximately 2% and diluted earnings per share in the range of $1.85-$1.90, excluding the impact of derivative accounting under SFAS 133. The Company further stated that it will update its fiscal third quarter and full year earnings on its second quarter earnings conference call.

CEO Betsy Burton commented, "We are disappointed in not achieving our sales and profit goals for the Holiday period. We made progress on many fronts, especially in terms of attracting back our core customers with compelling product assortments and improved marketing at the Zales brand. We know what we need to do, and we will continue to make the necessary changes to our business for long-term sustainable growth in both sales and earnings."

The Company also announced that it will be presenting at the SG Cowen Consumer Conference on Wednesday, January 10, 2007, at 10:30 a.m. Eastern Time. The presentation will be available on the Company's Web site at www.zalecorp.com.

Zale Corporation is a leading specialty retailer of fine jewelry in North America operating approximately 2,400 retail locations throughout the United States, Canada and Puerto Rico, as well as online. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Through its ZLC Direct organization, Zale also operates online at www.zales.com and www.baileybanksandbiddle.com. Additional information on Zale Corporation and its brands is available at www.zalecorp.com.

This release contains forward-looking statements, including statements regarding the Company's sales and earnings for the second quarter of fiscal year 2007. 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; personnel costs are a substantial portion of our expense structure and are difficult to control in the short-term; 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 Citibank U.S.A., N.A. may increase the cost of 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, 2006. 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.