Zale Corporation Clarifies Impact Of SFAS 133

As disclosed in its Form 10-K filed today, Zale Corporation (NYSE: ZLC) is subject to derivative accounting for its derivative instruments under SFAS 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires the Company to mark-to-market forward gold and silver contracts used in its hedging strategy to manage commodity cost fluctuations in inventory purchase costs. Any changes in the fair value of derivative instruments are reported as derivative gains and losses in the Company's consolidated statement of operations. The derivative accounting treatment will not impact the cash flows of the Company. Previously issued earnings guidance does not reflect any favorable or unfavorable impact that may arise from mark-to-market accounting. Based on existing forward contracts and current gold prices, the Company could record a derivatives loss of approximately $15 million in the first fiscal quarter but would expect to see a compensating improvement in the purchase cost of its product throughout the year.

Zale Corporation is North America's largest specialty retailer of fine jewelry operating approximately 2,350 retail locations throughout the United States, Canada and Puerto Rico. Through its ZLC Direct organization, Zale also operates online at www.zales.com and www.baileybanksandbiddle.com. Zale Corporation's brands include Zales Jewelers, Zales Outlet, Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewellers, Mappins Jewellers and Piercing Pagoda. Additional information on Zale Corporation and its brands is available at www.zalecorp.com.

Notice Regarding Forward-Looking Statements

This release contains forward-looking statements, including statements regarding the Company's future earnings (loss) per share and derivative gains (losses). 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 recently appointed a new chief executive officer, who may initiate strategies or other changes in store levels, expenses, staffing and related matters; 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 of or adversely affect the Company's operations and its ability to provide consumer credit and write credit insurance. 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.

For further information: Zale Corporation Vice President and Treasurer: David H. Sternblitz, 972-580-5047

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