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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended July 31, 1996
                                     OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _______________________


                           COMMISSION FILE NO. 0-21526

                                ZALE CORPORATION
             (Exact name of registrant as specified in its charter)


             DELAWARE                                 75-0675400
 (State or other jurisdiction of         (I.R.S. Employer Identification No.)
  incorporation or organization)

      901 W. WALNUT HILL LANE
           IRVING, TEXAS                                75038-1003
(Address of principal executive offices)                (Zip code)

       Registrant's telephone number, including area code:  (972) 580-4000

           Securities registered pursuant to Section 12(b) of the Act:

                                                        NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                         ON WHICH REGISTERED
             -------------------                        ---------------------

  Common Stock, $.01 par value per share               New York Stock Exchange
  Warrants to Purchase Common Stock, Series A          New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

     Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  Yes  X    No
                                                    ---      ---

     Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K.  [ ]

     As of September 5, 1996, the aggregate market value of the registrant's 
voting stock held by non-affiliates of the registrant was approximately 
$661,651,729.

     Indicate by check mark whether the registrant has filed all documents 
and reports required to be filed by Section 12, 13 or 15(d) of the Securities 
Exchange Act of 1934 subsequent to the distribution of securities under a 
plan confirmed by a court.  Yes  X    No
                                ---      ---

     As of September 5, 1996, the registrant had outstanding 35,209,126 
shares of its common stock, $.01 par value per share.                       

                     DOCUMENTS INCORPORATED BY REFERENCE.

     Part II of this report incorporates information from the registrant's 
Annual Report to Stockholders for the year ended July 31, 1996.  Part III of 
this report incorporates information from the registrant's definitive Proxy 
Statement relating to the registrant's annual meeting of stockholders to be 
held on October 30, 1996.

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<PAGE>
                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Zale Corporation (the "Company"), founded in 1924, is the largest 
specialty retailer of fine jewelry in the United States in terms of both 
retail sales and number of stores.  The Company had sales of $1,137.4 million 
for the fiscal year ended July 31, 1996 and 1,195 locations at July 31, 1996 
throughout the United States, Guam and Puerto Rico, primarily in regional 
shopping malls.  The Company conducts business through four distinct 
divisions.  The Zales-Registered Trademark- Division, with 582 stores, 
represents the Company's national brand and is focused on a broad range of 
mainstream consumers.  The Gordon's-SM- Division operates 323 stores and is 
being positioned as a major regional jeweler focusing on twelve regional 
markets and offering merchandise that is more contemporary and targeted at 
regional tastes.  The Guild Division operates 112 upscale jewelry stores 
under the Bailey, Banks & Biddle-Registered Trademark- and other locally 
established names.  The Diamond Park Division manages 174 leased fine jewelry 
departments in several major department store chains including Marshall 
Field's, Dillard's, Mercantile and Parisian.  In addition, the Company 
operates four outlet stores.

     The Company is incorporated in Delaware.  Its principal executive 
offices are located at 901 W. Walnut Hill Lane, Irving, TX 75038-1003, and 
its telephone number at that address is (972) 580-4000.

BUSINESS STRATEGY

     The Company's management team has revitalized the Company by making it 
customer-focused and instituting back-to-basics retailing disciplines.  Each 
of the Company's four divisions is a separate, accountable organization with 
its own professional buying and management team.  The Company continues to 
aggressively upgrade its store base, expand and refine its key item 
assortments, and achieve greater cost-efficiency in purchasing.  The Company 
increased the frequency and sharpened the focus of advertising, and has more 
effectively staffed stores for optimum customer service with dedicated, 
thoroughly trained managers and associates.

     From this solid base the Company is going beyond the basics to increase 
the productivity of existing stores, to open and acquire new stores, and to 
develop new methods of reaching out to existing and prospective customers.  
As of the end of fiscal 1996, the Company had upgraded the appearance of more 
than 475 stores over the last two years and plans to continue this  program 
until all key stores have been touched.  The Company is adding to its prime 
mall base, with approximately 100 new stores slated for 1997 fiscal year, 
many of which will be open by Thanksgiving.  These stores are the core of the 
Company's business.  The Company plans to increase its presence in the 
nation's malls over the next year and succeeding years.

     Most of the Company's expansion will come within the Zales Division, 
concentrating on parts of the country where Zales currently is 
under-represented.  While it is important that the Company expands its store 
base, it is equally important that the expansion occurs in the right 
locations.  The Company will be in prime mall locations only, on corners or 
in high traffic areas, with ample visibility.  As part of the Company's 
overall real estate strategy, the Company has set strict criteria that every 
new location must meet, with ample space to allow for a productive and 
appealing product presentation. The Company also plans to test freestanding 
Zales stores in or near high-traffic power centers.  If these stores are 
successful, this concept will be rolled out in the future.

     Distinct brand identities have been reemphasized for the Zales and 
Gordon's Divisions.  Merchandising has been refocused and strengthened.  
Management continues to improve the selection and upgrade the quality of 
certain top selling key item merchandise and makes certain that these items 
are available in an appropriate variety of styles and a range of competitive 
price points.  As a result, key items now account for approximately 30% of 
the Company's business. Inventory management systems continue to ensure that 
these items are consistently in stock.  The Company has ensured consistent 
availability of quality merchandise by increasing its merchandise shipping 
capacity almost 50% to handle the shipment of up to 100,000 units daily.  For 
example, shipments of watches are now handled through the expanded 
Distribution Center, drastically reducing drop shipments from manufacturers, 
so stores can always get the watch they need, when they need it.

                                      2

<PAGE>

     The Company's marketing effort has become more product and event-focused 
and has been streamlined to include newspaper inserts, direct mail and 
broadcast, especially television.  The Zale's Division's national presence 
makes television cost-effective.  The Company will substantially increase 
spending in that medium.  This new strategy has raised the visibility of the 
store.  Due to technology, convenience and changing lifestyles more people 
are beginning to shop from their homes.  The Company has incorporated a 
toll-free number in the direct mail catalogs and newspaper inserts this year. 
For the long-term, the Company believes several alternative formats can be 
tested and used, which will complement the Company's existing and future 
store base.  Additionally, Zale will expand into the mail order catalog 
business in the fall of 1996 to test the mail order market.

     The Company offers credit through its own private label credit cards, 
which account for approximately 50% of the Company's sales and believes that 
its private label credit cards increase sales, build customer loyalty and 
assist in providing a customer database for direct marketing efforts.  The 
Company has enhanced and accelerated the approval process, whereby those 
customers with a satisfactory prior credit history can be approved rapidly.  
The Company's system automatically transmits customer applications to the 
credit centers for review while the customer is still in the store.  That 
flexibility enabled the Company to open more than 165,000 new accounts over 
the fiscal 1996 holiday season.
 
     The Company just completed the second year of a three year store 
remodeling and refurbishment program.  This program has enabled the Company 
to enhance its stores in certain key markets relative to its competition.   
The Company anticipates spending approximately $61.0 million on capital 
expenditures in fiscal year 1997 focusing principally on new stores.  Capital 
expenditures are typically scheduled for the late spring through early fall 
in order to have new or renovated stores ready for the Christmas selling 
season.  Additionally, the Company plans significant upgrades to its 
management information systems over the next several years.  During the year 
ended July 31, 1996, the Company made approximately $48.8 million in capital 
expenditures, a significant portion of which was used to enhance the 
appearance of 91 stores and to open 44 new stores. In addition, on January 
18, 1996, the Company acquired Karten's Jewelers, Inc., a 20-store chain.  
The addition of Karten's significantly increased the Company's presence in 
the Northeast.  In fiscal years 1997 and 1998, the Company intends to add 
approximately 200 new locations through new store openings or strategic 
acquisitions.

SELECTED DIVISIONAL DATA

     The Company operates principally under four divisions as described 
below. The following table presents net sales for the Zales, Gordon's, Guild 
and Diamond Park Divisions of the Company.

                                            NET SALES BY DIVISION
                                  ----------------------------------------
                                             YEAR ENDED JULY 31,          
                                  ----------------------------------------
                                     1996             1995          1994  
                                  ----------       ---------      --------
                               (AMOUNTS IN THOUSANDS EXCEPT NUMBER OF STORES)
Net Sales:
     Zales Division. . . . . .     $  525,384      $  428,794      $374,849
     Gordon's Division . . . .        264,298         262,540       234,974
     Guild Division. . . . . .        205,418         197,267       182,278
     Diamond Park Division . .        133,463         138,187       127,761
     Other . . . . . . . . . .          8,814(1)        9,361(1)        445
                                   ----------      ----------      --------
          Total. . . . . . . .     $1,137,377      $1,036,149      $920,307
                                   ----------      ----------      --------
                                   ----------      ----------      --------
Number of stores (end of 
  period). . . . . . . . . .            1,195           1,181         1,231
                                        -----           -----         -----
                                        -----           -----         -----

(1)  Other net sales in fiscal 1996 and fiscal 1995 includes sales from the
     Company's Outlet stores which are being used to sell overstocked and other
     merchandise no longer sold in the regular retail locations.  Outlet store
     sales and operating results in fiscal 1994 were not significant and were
     classified in cost of sales.

                                       3

<PAGE>

     ZALES DIVISION

     The Zales Division is positioned as the Company's national flagship and 
is a leading brand name in jewelry retailing in the United States.  At July 
31, 1996, the Zales Division had 582 mall-based stores in 49 states and 
Puerto Rico. Average store size is approximately 1,400 square feet and the 
average purchase is $243.  Zales accounted for approximately 46% of the 
Company's sales in fiscal 1996.

     Zales' customers represent a cross-section of mainstream America.  The 
product focus of the Zales Division is on bridal, diamond and gold jewelry. 
Bridal merchandise represents 36% of the Division's merchandise sales, with 
fashion jewelry and watches comprising most of the remaining 64%.  The 
Company believes that the prominence of diamond jewelry in the product 
selection fosters an image of quality and trust among consumers.  While 
maintaining a strong focus on the bridal segment of the business, added 
emphasis is being placed on the non-bridal merchandise and gift-giving 
aspects of the business.  New product lines, including Blue Lagoon cultured 
pearls by Mikimoto, and Movado watches, have been added.

     Zales' merchandise selection is generally standardized across the 
nation. The combination of Zales' national presence and standardized 
merchandise selection allows it to use television advertising across the 
nation as its primary advertising medium, supplemented by newspaper inserts 
and direct mail.

     The following table sets forth the number of stores and average sales per
store for the Zales Division for the periods indicated:

                                         YEAR ENDED JULY 31,
                                -------------------------------------
                                  1996           1995          1994  
                                ------- -      --------      --------
  Average sales per store . . . $928,200       $849,100      $716,700
  Stores opened during period .       89(1)           8             2
  Stores closed during period .        6             30             4
  Total stores  . . . . . . . .      582            499           521

   (1)    Includes 40 stores transferred from the Gordon's Division during
          fiscal 1996 and 20 Karten's stores acquired in January 1996.

          GORDON'S DIVISION

          The Company is repositioning Gordon's as a major regional brand 
focusing on twelve regional markets.  At July 31, 1996, the Gordon's Division 
had 323 stores in 38 states and Puerto Rico, substantially all of which 
operate under the trade name Gordon's Jewelers.  Average store size is 
approximately 1,300 square feet and the average purchase is $240.  Gordon's 
accounted for approximately 23% of the Company's sales in fiscal 1996.

          Gordon's continues to operate as separate business unit with its 
own management team and has developed its own buying and merchandising 
strategy. The concept of the Division's merchandising strategy distinguishes 
Gordon's stores from Zales stores by devoting a portion of store inventory to 
products that seek to satisfy demand in each particular regional market and 
by emphasizing a more contemporary look in its product line. A substantial 
portion of the remaining merchandise sold by stores in the Gordon's Division 
overlaps the Zales Division product line.  Regional television advertising, 
that emphasizes key items will be introduced for Gordon's in fiscal 1997, 
complementing the division's radio campaigns and printed inserts.

          In fiscal 1997, the Gordon's Division will continue to emphasize 
its new image to match its customer base and will further tailor key items to 
customer's regional preferences.  Steps to upgrade Gordon's have included 
store remodeling, a more distinctive and fashion-oriented product assortment, 
improved displays, a reduced degree of promotional pricing and the 
application of more stringent credit-approval standards.

                                       4

<PAGE>

          The following table sets forth the number of stores and average sales
per store for the Gordon's Division for the periods indicated:

                                          Year Ended July 31,
                                  ------------------------------------
                                    1996          1995          1994
                                  -------       --------      --------
Average sales per store . . .     $796,100      $711,500      $624,900
Stores opened during period .           13             5             4
Stores closed during period .           57(1)         13             6
Total stores  . . . . . . . .          323           367           375

(1) Includes 40 stores transferred to the Zales Division during fiscal 1996.


     GUILD DIVISION

     The Guild Division offers higher-end merchandise, more exclusive designs
and a prestigious shopping environment for the upscale customer.  At July 31,
1996, the Guild Division operated 112 upscale jewelry stores in 26 states and
Guam.  The Guild Division has an average purchase of $438 and the average store
is approximately 2,600 square feet.  The Guild Division accounted for
approximately 18% of the Company's sales in fiscal 1996.  The following table
sets forth the Guild Division's trade names and the number of stores operating
under each of those names at July 31, 1996.

     TRADE NAMES                              NUMBER OF STORES
     -----------                              ----------------
     Bailey, Banks & Biddle-Registered Trademark-. . 78             
     Corrigan's-Registered Trademark-. . . . . . . . 20             
     Sweeney's-Registered Trademark- . . . . . . . .  4             
     Stifft's-Registered Trademark-. . . . . . . . .  3             
     Dobbins-Registered Trademark- . . . . . . . . .  2 
     J. Herbert Hall-Registered Trademark- . . . . .  2 
     Linz-Registered Trademark-. . . . . . . . . . .  1 
     Zell Bros.-Registered Trademark-. . . . . . . .  2 

     Bailey, Banks & Biddle is the name borne by 78 Guild stores.  Rooted in
tradition, these stores date back to 1832.  Along with the other Guild stores,
including Corrigan's, Sweeney's and Zell Bros., they are regarded as pre-eminent
in their markets.  Often carrying exclusive items to appeal to the more affluent
customer, Guild stores focus on diamond, precious stone and gold jewelry,
watches and giftware, with emphasis on classic and traditional themes.

     Guild stores rely heavily on upscale direct-mail catalogs, enabling the
stores to focus on specific products in specific markets.  In addition, in the
fall of 1996 Guild will expand its customer base in cross-promotional campaigns
using upscale customer lists from such companies as American Express, First USA
MasterCard/VISA and American Airlines.  This initiative will help Guild stores
more accurately target prospective customers in cost-efficient manner.

   The following table sets forth the number of stores and average sales per 
store for the Guild Division for the periods indicated:

                                             Year Ended July 31,
                                ----------------------------------------
                                   1996           1995           1994
                                ----------     ----------     ----------
Average sales per store . . .   $1,740,800     $1,529,200     $1,391,400
Stores opened during period .            1              4              4
Stores closed during period .           12             11              7
Total stores  . . . . . . . .          112            123            130


          DIAMOND PARK DIVISION

          The Diamond Park Division offers services for retailers that wish to
use an outside provider for specialized management and marketing skills in
connection with the sale of fine jewelry.  At July 31, 1996, the Diamond Park
Division operated 174 leased locations in department stores including
Dillard's-Registered Trademark- (59 locations), Mercantile-Registered Trademark-
(67 locations), Parisian (25 locations) and Marshall Field's-Registered
Trademark- (23 locations) in 24 states.  The Diamond Park Division accounted for
approximately 12% of the Company sales in fiscal 1996 and had an average
purchase of $163.

                                      5

<PAGE>

          The Diamond Park Division is in a position to actively seek, on a
regional level, still more host department stores in which to operate.  An
important such addition in fiscal 1996 was the entry into 25 stores of the
Parisian chain in the Southeast.  Also in the year, the Diamond Park Division
began operating leased departments at 11 new Mercantile stores and 1 new
Marshall Field's store.

          The Diamond Park Division tailors its merchandising concepts and
marketing efforts to those of the host store, tying into the store's newspaper
advertising, inserts and direct-mail catalogs.  Management considers the primary
product franchise areas to be watches, gold and diamond fashion jewelry.

          The following table sets forth the number of departments and average
sales per department for the Diamond Park Division for the periods indicated:

                                              Year Ended July 31,
                                    --------------------------------------
                                      1996           1995           1994
                                    --------       --------       --------
Average sales per department . .    $733,300       $701,500       $591,500
Departments opened during                 34             18             19
 period  . . . . . . . . . . . .
Departments closed during                 48             35             46
 period  . . . . . . . . . . . .
Total departments. . . . . . . .         174            188            205


BUSINESSES OF NON-RETAIL AFFILIATES

     Zale Indemnity Company, Zale Life Insurance Company and Jewel Re-Insurance
Ltd. are providers of various types of insurance coverage, which typically are
marketed to the Company's private label credit card customers.  The three
companies are the insurers (either through direct written or reinsurance
contracts) of the Company's customer credit insurance coverages.  In addition to
providing replacement property coverage for certain perils, such as theft,
credit insurance coverage provides protection to the creditor and cardholder for
losses associated with the disability, involuntary unemployment or death of the
cardholder.  Zale Life Insurance Company also provides group life insurance
coverage for eligible employees of the Company.  Zale Indemnity Company, in
addition to writing direct credit insurance contracts, also has certain
discontinued businesses that it continues to run off.  Credit insurance
operations are dependent on the Company's retail sales on its private label
credit cards and are not significant on a stand-alone basis.

PURCHASING AND INVENTORY

     The Company purchases substantially all of its merchandise in finished form
from a network of established suppliers and manufacturers located primarily in
the United States, Southeast Asia, Hong Kong and Italy.  The Company either
purchases merchandise from its vendors or acquires merchandise on consignment.
The Company has intentionally shifted its merchandising mix over the last year
to reduce the amount of consigned merchandise and increase its investment in
owned merchandise.  The Company had approximately $78.9 million and $85.9
million of consignment inventory on hand at July 31, 1996 and 1995,
respectively.  The Company is subject to the risk of fluctuation in prices of
diamonds, precious stones and gold.  The Company historically has not engaged in
any substantial amount of hedging activities with respect to merchandise held in
inventory, since the Company has been able to adjust retail prices to reflect
significant price fluctuations in the commodities that are used in the
merchandise it sells.  No assurances, however, can be given that the Company
will be able to adjust prices to reflect commodity price fluctuations in the
future.  The Company is not subject to substantial currency fluctuations because
most purchases are dollar denominated.  During the years ended July 31, 1996 and
1995, the Company purchased approximately 29% of its merchandise from its top
five vendors.

COMPETITION

     The retailing industry is highly competitive.  The industry is fragmented,
and the Company competes with a large number of independent regional and local
jewelry retailers, as well as national jewelry chains.  The Company must also
compete with other types of retailers who sell jewelry and gift items, such as
department stores, catalog showrooms, discounters, direct mail suppliers and
home shopping programs.  The Company believes that it is also 

                                      6


<PAGE>

competing for consumers' discretionary spending dollars.  The Company must, 
therefore, also compete with retailers who offer merchandise other than 
jewelry or giftware.

     Notwithstanding the national or regional reputation of its competition, the
Company believes that it must compete on a mall-by-mall basis with other
retailers of jewelry as well as with retailers of other types of discretionary
items.  Therefore, the Company competes primarily on the basis of reputation for
high-quality, store location, distinctive and value-priced merchandise, personal
service and its ability to offer private label credit card programs to customers
wishing to finance their purchases.  The Company's success is also dependent on
its ability to react to and create customer demand for specific product lines.

     The Company holds no material patents, licenses (other than its licenses to
operate its Diamond Park leased locations), franchises or concessions; however,
the established trade names for stores and products in the Company's Zales,
Gordon's and Guild Divisions are important to the Company in maintaining its
competitive position in the jewelry retailing industry.


CREDIT OPERATIONS

     Jewelers Financial Services, Inc. ("JFS") has credit approval, customer
service and collection systems that management considers to be sophisticated.
The Company offers and grants credit through its private label credit card
program.  See "Business Strategy".  The credit programs help facilitate the sale
of merchandise to customers who wish to finance their purchases rather than use
cash or available credit limits on their major credit cards.  Approximately 50%
of the Company's retail sales during fiscal 1996 through its Zales, Gordon's and
Guild Divisions were generated by credit sales on the private label credit
cards.  The Company has more than 1.1 million active charge customers who have a
good credit history and available credit and more than 1.9 million customer
names on file that are not current charge customers.  The Company uses many of
these customer names in its targeted marketing programs.

     Credit extension, customer service, payment processing and collections for
all the accounts are performed by JFS at credit centers located in Tempe,
Arizona; Clearwater, Florida; Irving, Texas; San Marcos, Texas; San Juan, Puerto
Rico; and Guam.  The Company has enhanced the approval process for its private
label credit card, whereby those customers with a satisfactory prior credit
history can be approved rapidly.  Flexible payment arrangements, typically
twenty-eight to thirty-four months, are extended to credit customers.

     The following table presents certain data concerning sales, credit sales
and accounts receivable for the past two fiscal years (1):

                                                         As at or for the
                                                    fiscal year ended July 31,
                                                    --------------------------
                                                       1996             1995
                                                    ---------         --------
Net sales (thousands)                                $995,100        $888,601
Net credit sales (thousands)                          500,215         458,664
Accounts receivable (thousands)                       468,331         436,336
Credit sales as a percentage of net sales                50.3%           51.6%
Average number of active customer accounts 
  (thousands)                                             678             689
Average balance per customer account                     $687            $668
Average monthly collection percentage                     9.2%            9.1%
Bad debt expense as a percentage of credit sales         10.7%            9.1%
Bad debt expenses as a percentage of net sales            5.4%            4.7%

(1)  The table excludes the Diamond Park Division which does not have a
     proprietary credit plan.


     Credit sales have decreased as a percentage of total sales, in part 
because of an upgrading in minimum credit standards at the Gordon's Division 
and increased competition from issuers of major credit cards.  However, bad 
debt expense as a percentage of credit sales and net sales increased in 
fiscal 1996 compared to fiscal 1995.  The Company believes that these 
increases have resulted from general economic conditions.

                                      7


<PAGE>

EMPLOYEES

     As of July 31, 1996, the Company had approximately 10,000 employees, less
than 1% of whom were represented by unions.   The Company considers its
relations with its employees to be good.

     This Annual Report on Form 10-K contains forward-looking statements,
including statements concerning expected capital expenditures to be made in the
future, expected significant upgrades to its management information systems over
the next several years, the addition of new locations through either new store
openings or strategic acquisitions, and the adequacy of the Company's sources of
cash to finance its current and future operations.  These forward-looking
statements involve a number of risks and uncertainties.  In addition to the
factors discussed above, among other factors that could cause actual results to
differ materially are the following: the impact of the general economic
conditions due to the fact that jewelry purchases are discretionary for
consumers and may be affected by adverse trends in the general economy;
competition in the jewelry business which is fragmented; the variability of
quarterly results and seasonality of the retail business; the ability to improve
productivity in existing stores and to increase comparable store sales; the
availability of alternate sources of merchandise supply in the case of an abrupt
loss of any significant supplier during the three month period leading up to the
Christmas season; the dependence on key personnel who have been hired or
retained since bankruptcy; the changes in regulatory requirements which are
applicable to the Company's business; management's decisions to pursue new
product lines which may involve additional costs; and the risk factors listed
from time to time in the Company's filings with the Securities and Exchange
Commission.


ITEM 2.  PRINCIPAL PROPERTIES

     The Company occupies a corporate headquarters facility, completed in March
1984 with 430,000 square feet. The Company amended and extended its corporate
headquarters lease effective at the expiration of the current five-year lease.
The lease will extend through September 2008.  The facility is located on a 17-
acre tract in Las Colinas, a planned business development in Irving, Texas, near
the Dallas/Fort Worth International Airport.  The Company owns 33 acres of land
surrounding the corporate headquarters facility and a 120,000 square foot
warehouse in Dallas, Texas.

     The Company also leases four credit centers located in Clearwater, Florida
(30,000 square feet), Tempe, Arizona (24,200 square feet), San Juan, Puerto Rico
(2,900 square feet) and Guam (556 square feet) and one national collections
center located in San Marcos, Texas (9,000 square feet).

     The Company rents most of its retail spaces, other than the Diamond Park
Division leased locations, under leases that generally range from five to ten
years and may contain minimum rent escalations.  Most of the store leases
provide for the payment of base rentals plus real estate taxes, insurance,
common area maintenance fees and merchants association dues, as well as
percentage rents based on the stores' gross sales.

     The following table indicates the expiration dates of the current terms of
the Company's leases as of July 31, 1996:


                                                     DIAMOND
  TERM EXPIRES        ZALES    GORDON'S     GUILD      PARK           PERCENTAGE
IN CALENDAR YEARS   DIVISION   DIVISION   DIVISION   DIVISION   TOTAL  OF TOTAL
-----------------   --------   --------   --------   --------   -----  ---------
 1997 and prior        110        71         23         72        276      23%
 1998                   75        52         11         16        154      13%
 1999                   66        37         17          0        120      10%
 2000                   46        21         11         29        107       9%
 2001 and                                         
   thereafter          285       142         50         57        534      45%
                       ---       ---        ---        ---      -----     ----
 Total number of       
   leases              582       323        112        174      1,191     100%
                       ---       ---        ---        ---      -----     ----
                       ---       ---        ---        ---      -----     ----

                                      8


<PAGE>

     Management believes substantially all of the store leases expiring in 1997
that it wishes to renew (including leases which expired earlier and are on
month-to-month extensions) will be renewed on terms not materially less
favorable to the Company than the terms of the expiring leases.


ITEM 3.  LEGAL PROCEEDINGS

     JEWEL RECOVERY, L.P. Pursuant to the plan of reorganization under Chapter
11 of the United States Bankruptcy Code (the "Plan"), Zale assigned certain
claims and causes of action and advanced $3.0 million to Jewel Recovery, L.P., a
limited partnership ("Jewel Recovery") which was formed upon Zale's emergence
from bankruptcy.  The sole purpose of Jewel Recovery is to prosecute and settle
such assigned claims and causes of action.  The general partner of Jewel
Recovery is Jewel Recovery, Inc., a subsidiary of the Company.  Its limited
partners are holders of various unsecured claims against Zale.  The $3.0 million
advance was fully reserved as of the effective date as its collectibility was
uncertain.

     Jewel Recovery has pursued certain claims and has been awarded significant
recoveries against third parties.  During the first quarter of fiscal year 1996,
Zale was notified that it would recover its $3.0 million advance to Jewel
Recovery.  The $3.0 million advance was repaid to Zale in December 1995.

     In addition, the Company has agreed to indemnify certain parties to
litigation settlements entered into by the Company in connection with the plan
against certain cross-claims, similar third-party claims or costs of defending
such claims brought against such parties.  At October 16, 1996, no material
claims had been asserted against the Company for such indemnification.

     OTHER.  The Company is involved in certain other legal actions and claims
arising in the ordinary course of business.  Management believes that such
litigation and claims will be resolved without material effect on the Company's
financial position or results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders of the Company
during the quarter ended July 31, 1996.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following individuals serve as executive officers of the Company.
Officers are elected by the Board of Directors, each to serve until his
successor is elected and qualified, or until his earlier resignation, removal
from office or death.

     ROBERT J. DINICOLA, Age 49.
     CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND DIRECTOR

     Mr. DiNicola has served as Chairman of the Board, Chief Executive Officer
     and a director of the Company since April 18, 1994.  For the three years
     prior to joining the Company, Mr. DiNicola was a senior executive officer
     of The Bon Marche Division of Federated Department Stores, Inc., having
     served as Chairman and Chief Executive Officer of that Division from 1992
     to 1994 and as its President and Chief Operating Officer from 1991 to 1992.
     From 1989 to 1991, Mr. DiNicola was a Senior Vice President of Rich's
     Department Store Division of Federated.  For seventeen years, prior to
     joining the Federated organization, Mr. DiNicola was associated with
     Macy's, where he held various executive, management and merchandising
     positions, except for a one-year period while he held a division officer
     position with May Co.

                                       9

<PAGE>

     MERRILL J. WERTHEIMER, Age 57.
     EXECUTIVE VICE PRESIDENT - FINANCE AND CHIEF FINANCIAL OFFICER

     Mr. Wertheimer was appointed Executive Vice President - Finance and
     Administration on January 27, 1995 and re-assumed the role of  Chief
     Financial Officer on June 27, 1996 following the resignation of the former
     Senior Vice President and Chief Financial Officer.  Currently, Mr.
     Wertheimer oversees all financial responsibilities of the Company.  From
     June 1991 through January 1995, he served as Senior Vice President and
     Controller of the Company.  From February 1990 to May 1991, Mr. Wertheimer
     served as President and Chief Executive Officer of Henry Silverman
     Jewelers.  Mr. Wertheimer served as Senior Vice President of the Company
     from September 1987 to October 1989 and also served as Chief Financial
     Officer of the Company from March 1987 to October 1989.

     BERYL B. RAFF, Age 45.
     SENIOR VICE PRESIDENT AND PRESIDENT, ZALES DIVISION

     Ms. Raff joined the Company on November 21, 1994 as President of the Zales
     Division.  From March 1991 through October 1994, Ms. Raff served as Senior
     Vice President of Macy's East with responsibilities for its jewelry
     business in a twelve state region.  From April 1988 to March 1991, Ms. Raff
     served as Group Vice President of Macy's South/Bullocks.  Prior to 1988,
     Ms. Raff had seventeen years of retailing and merchandising experience with
     the Emporium and Macy's department stores.


     MARY L. FORTE, Age 45
     SENIOR VICE PRESIDENT AND PRESIDENT, GORDON'S DIVISION

     Ms. Forte joined the Company on July 18, 1994 as President of the Gordon's
     Division.  From January 1994 to July 1994, Ms. Forte served as Senior Vice
     President of QVC - Home Shopping Network.   From July 1991 through January
     1994, Ms. Forte served as Senior Vice President of the Bon Marche', Home
     Division.  From July 1989 to July 1991, Ms. Forte was Vice President of
     Rich's Department Store, Housewares Division.  In addition to the above,
     Ms. Forte has an additional thirteen years of retailing and merchandising
     experience with Macy's, The May Company and Federated Department stores.

     PAUL G. LEONARD, Age 41.
     SENIOR VICE PRESIDENT AND PRESIDENT, GUILD DIVISION

     Mr. Leonard was appointed President of the Company's Fine Jewelers Guild
     Division on January 27, 1995.  From October 1994 to January 1995, Mr.
     Leonard served as President of  Corporate Merchandising for the Company.
     For three years prior to joining the Company, Mr. Leonard held positions as
     General Manager of Jewelry and then Senior Vice President of Soft Lines for
     Ames Department Store.  Prior to that, Mr. Leonard was a Merchandise Vice
     President with The May Company.  Mr. Leonard has more than twenty years of
     retailing and merchandising experience with an emphasis in jewelry.

     MAX A. BROWN, Age 67.
     SENIOR VICE PRESIDENT AND PRESIDENT, DIAMOND PARK DIVISION

     Mr. Brown has been President of the Company's Diamond Park Division since
     January 11, 1993.  From July 1989 to January 1993, Mr. Brown was Vice
     President and General Manager of the Diamond Park Division.  Prior to 1989,
     he served as the Director of Stores for the Diamond Park Division.

     SUE E. GOVE, Age 38.
     SENIOR VICE PRESIDENT, TREASURER

     Ms. Gove was appointed Senior Vice President and Treasurer on September 9,
     1996.  From January 1996 to September 1996, she held the position of Senior
     Vice President, Corporate Planning and Analysis.  From February


                                     10
<PAGE>

     1989 through January 1996, she served as Vice President, Corporate Planning
     and Analysis.  Ms. Gove joined the Company in 1980 and served in numerous
     assignments until her appointment to Vice President in 1989.

     GREGORY HUMENESKY, Age 45
     SENIOR VICE PRESIDENT, HUMAN RESOURCES

     Mr. Humenesky was appointed Senior Vice President, Human Resources on April
     15, 1996.  From January 1995 to April 1996 he held the position of Vice
     President, Personnel Development and Staffing for the Company.  For eight
     years prior to joining the Company, Mr. Humenesky was Senior Vice
     President, Human Resources for Macy's West.  From June 1973 to February
     1987, Mr. Humenesky held senior level Human Resources positions within the
     Macy's organization.

     PAUL D. KANNEMAN, Age 39
     SENIOR VICE PRESIDENT AND CHIEF INFORMATION OFFICER

     Mr. Kanneman joined the Company on November 14, 1994 as Chief Information
     Officer.  From July 1993 to November 1994, Mr. Kanneman was an Associate
     Partner with Andersen Consulting LLP.  Mr. Kanneman was a Principal from
     August 1991 to July 1993, and a Senior Associate from August 1989 to July
     1991 with Booz, Allen & Hamilton, Inc.

     ERVIN G. POLZE, Age 44.
     SENIOR VICE PRESIDENT, OPERATIONS

     Mr. Polze was appointed Senior Vice President, Operations on January 17,
     1996.  From February 1995 through January 1996, he served as Vice
     President, Operations.  He held the position of Vice President, Controller
     from March 1988 through February 1995.  Mr. Polze joined the Company in
     January 1983 and served in several assignments until his appointment to
     Vice President in March 1988.

     ALAN P. SHOR, Age 37.
     SENIOR VICE PRESIDENT, ADMINISTRATION, GENERAL COUNSEL AND SECRETARY

     Mr. Shor joined the Company on June 5, 1995 as Senior Vice President,
     General Counsel and Secretary.  During fiscal 1996, Mr. Shor assumed
     additional responsibilities in the area of administration including loss
     prevention, real estate and property development.  For two years prior to
     joining the Company, Mr. Shor was the managing partner of the Washington,
     D.C. office of the Troutman Sanders law firm, whose principal office is
     based in Atlanta, Georgia.  Mr. Shor, a member of Troutman Sanders since
     1983, was a partner of the firm from 1990 to 1995.


                                   PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

     The information required by this item is included in the registrant's
Annual Report to Stockholders for the year ended July 31, 1996 on page 32 under
the caption "Common Stock Information," and is incorporated herein by reference.


                                     11
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

     The information required by this item is included in the registrant's 
Annual Report to Stockholders for the year ended July 31, 1996 on page 13 
under the caption "Selected Financial Data," and is incorporated herein by 
reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

     The information required by this item is included in the registrant's 
Annual Report to Stockholders for the year ended July 31, 1996 on pages 14 
through 17 under the caption "Management's Discussion and Analysis of 
Financial Condition and Results of Operations," and is incorporated herein by 
reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this item is included in the registrant's 
Annual Report to Stockholders for the year ended July 31, 1996 on pages 18 
through 31, and is incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

     None.


                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item relating to directors and Section
16(a) Reporting is included in the registrant's definitive Proxy Statement
relating to its annual meeting of stockholders to be held on October 30, 1996
under the captions "Proposal No. 1:   Election of Directors," on pages 4 through
6, and "Section 16(a) Reporting,"  on page 22, and is incorporated herein by
reference.  See also "EXECUTIVE OFFICERS OF THE REGISTRANT" appearing in Part I
hereof.


ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this item is included in the registrant's 
definitive Proxy Statement relating to its annual meeting of stockholders to 
be held on October 30, 1996 under the caption "Executive and Director 
Compensation," on pages 12 through 17, and, except as stated in the next 
sentence, is incorporated herein by reference.  The foregoing incorporation 
by reference specifically excludes the discussion in such Proxy Statement 
under the captions "Report of the Compensation Committee on Executive 
Compensation" and "Stock Price Performance."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is included in the registrant's
definitive Proxy Statement relating to its annual meeting of stockholders to be
held on October 30, 1996 under the caption "Outstanding Voting Securities of the
Company and Principal Holders Thereof," on pages 2 to 3, and is incorporated
herein by reference.


                                     12
<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is included in the registrant's
definitive Proxy Statement relating to its annual meeting of stockholders to be
held on October 30, 1996 under the caption "Related Party Transactions," on page
17, and is incorporated herein by reference.

                                   PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

     The following documents are filed as part of this report.

     (1)  FINANCIAL STATEMENTS

          See Item 8 on page 12.

     (2)  INDEX TO FINANCIAL STATEMENT SCHEDULES                      PAGE
                                                                     NUMBER

          Report of Independent Public Accountants                     17

          Schedule II -   Valuation and Qualifying Accounts            18

          All other financial statements and financial statement schedules for
          which provision is made in the applicable accounting regulation of 
          the Securities and Exchange Commission are not required under the
          related instructions, are not material or are not applicable and, 
          therefore, have been omitted or are included in the consolidated
          financial statements or notes thereto.


     (3)  EXHIBITS

          2.1  Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
               Code with Respect to Plan of Reorganization under Chapter 11 of
               the Bankruptcy Code for Zale Corporation and its Affiliated
               Debtors, dated March 22, 1993 (Exhibit T3E-1). (1)

          2.2  Motion to Approve Amendments to the Plan of Reorganization under
               Chapter 11 of  the Bankruptcy  Code of  Zale Corporation  and
               its  Affiliated  Debtors, dated  May 19, 1993 (Exhibit 2.6). (2)

          2.3  Order Approving Amendments to the Plan of Reorganization under
               Chapter 11 of the Bankruptcy Code of Zale Corporation and its
               Affiliated Debtors, dated May 20, 1993 (Exhibit 2.7).  (2)

          3.1  Restated Certificate of Incorporation of Zale Corporation, dated
               July 30, 1993.  (3)

          3.2  Amended and Restated Bylaws of Zale Corporation, dated July 30,
               1993.  (7)

          4.1  Warrant Agreement, dated as of July 30, 1993, between Zale
               Corporation and The First National Bank of Boston, as warrant
               agent, governing the Warrants to Purchase Common Stock, Series A.
               (3)

          4.2  Indenture, dated as of July 1, 1994, among Zale Funding Trust, as
               Issuer and Bankers Trust Company, as Indenture Trustee.  (6)

          4.3  Purchase and Servicing Agreement, dated as of July 1, 1994, among
               Zale Funding Trust, Diamond Funding Corp., Zale Delaware, Inc.,
               and Jewelers Financial Services, Inc.  (6)


                                     13

<PAGE>

       4.4    Revolving Credit Agreement, dated as of August 11, 1995, among
              Zale Corporation, Zale Delaware, Inc., the lending institutions
              set forth therein, and The First National Bank of Boston, as
              Agent for such lenders.  (6)

       4.5    Amended and Restated Lender Security Agreement, dated as of
              August 11, 1995, among Zale Delaware, Inc., Zale Corporation, and
              The First  National  Bank of  Boston, as collateral agent.  (6)
            
  *    10.1   Indemnification agreement, dated as of July 21, 1993, between
              Zale Corporation and certain present and former directors
              thereof.  (6)
             
       10.2   Amended and Restated Agreement of  Limited Partnership of Jewel
              Recovery, L.P., dated as of July 30, 1993.  (3)
              
  *    10.3   Zale Corporation Stock Option Plan.  (3)

       10.4   Trust Agreement, dated as of November 24, 1993, among Zale
              Corporation, Zale Delaware, Inc. and United States Trust Company
              of New York.  (4)
              
       10.5   Agreement for Systems Operations Services, dated as of  February
              1, 1993,  between  Zale Corporation and Integrated Systems
              Solutions Corporation.  (3)
              
      10.5a    Amendment #1 to Agreement for Systems Operations Services,
               dated as of August 1, 1994, between Zale Corporation and
               Integrated Systems Solutions Corporation.  (6)
              
  *    10.6   Severance and Settlement Agreement, dated as of December 3, 1993,
              between Zale Corporation and E. Peter Healey.  (4)
              
  *    10.7   Severance and Settlement Agreement, dated as of May 15, 1995,
              between Zale Corporation and  Dolph B. Simon.  (6)
              
  *    10.8   The Executive Severance Plan for Zale Corporation and Its
              Affiliates, as amended and restated as of February 10, 1994.  (4)

  *    10.8a  Amendment to The Executive Severance Plan for Zale
              Corporation and Its Affiliates effective May 20, 1995. (7)

  *    10.9   Employment Agreement, dated as of December 22, 1993, between Zale
              Corporation and Larry Pollock.  (4)

  *   10.10   Employment Agreement, dated as of March 14, 1994, between
              Zale Corporation and Robert DiNicola.  (5)

      10.11   Lease Agreement Between Principal Mutual Life Insurance
              Company, As Landlord, and Zale Corporation, as Debtor and
              Debtor-In-Possession, As Tenant, dated as of September 17,
              1992. (7)

      10.11a  First Lease Amendment and Agreement between Principal Mutual
              Life Insurance Company and Zale Delaware, Inc., dated as of
              February 1, 1996. (7)

          11  Statement re computation of per share earnings.  (7)

          13  Incorporated   Portions   of   the  Annual   Report to
              Stockholders  for   the year ended  July  31, 1996.  (7)

          21  Subsidiaries of the registrant.  (7)


                                     14

<PAGE>


          23  Consent of Independent Public Accountants.  (7)

          27  Financial data schedule.  (7)


------------------------

          (1)  Incorporated by reference from the exhibit shown in parenthesis
               to the registrant's Form T-3 (No. 22-24-68) filed with the
               Commission on April 2, 1993.

          (2)  Incorporated by reference from the exhibit shown in parenthesis
               to the registrant's Form 8-A/A (No. 02-21526) filed with the
               Commission on July 16, 1993.

          (3)  Previously filed as an exhibit to the registrant's Form 10-Q (No.
               1-4129) for the quarterly period ended September 30, 1993, and
               incorporated herein by reference.

          (4)  Incorporated by reference to the corresponding exhibit  to the
               registrant's Registration Statement on Form S-1 (No. 33-73310)
               filed with the Commissions on December 23, 1993, as amended.

          (5)  Previously filed as an exhibit to the registrant's Form 10-K (No.
               0-21526) for the fiscal year ended March 31, 1994, and
               incorporated herein by reference.

          (6)  Previously filed as an exhibit to the registrant's Form 10-K (No.
               0-21526) for the fiscal year ended July 31, 1995, and
               incorporated herein by reference.

          (7)  Filed herewith.

           *   Management Contracts and Compensatory Plans.


     (4)  REPORTS ON FORM 8-K


          Reports on Form 8-K were filed during the quarter ended July 31, 1996.

          1.   A report on Form 8-K dated July 1, 1996, was filed by the Company
               announcing the resignation of Thomas E. Whiddon as Senior Vice
               President and Chief Financial Officer and that Merrill J.
               Wertheimer would re-assume the title of Chief Financial Officer.

          2.   A report on Form 8-K dated July 16, 1996, was filed by the
               Company announcing the implementation of the Zale Delaware, Inc.
               Supplemental Executive Retirement Plan.


                                     15

<PAGE>
                                 SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of the 22 day of
October, 1996.

                              ZALE CORPORATION

                              By: /s/   ROBERT J. DINICOLA
                                  --------------------------------------------
                                   Robert J. DiNicola
                                   Chairman of the Board and Chief Executive
                                   Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          SIGNATURE                            TITLE                                   DATE
          ---------                            -----                                   ----
<S>                               <C>                                                <C>
 /s/ ROBERT J. DINICOLA           Chairman of the Board and Chief                    October 22, 1996
---------------------------       Executive Officer (principal
     Robert J. DiNicola           executive officer of the
                                  registrant)

 /s/ MERRILL J. WERTHEIMER        Executive Vice President - Finance                 October 22. 1996
---------------------------       and Chief Financial Officer  
     Merrill J. Wertheimer        (principal financial officer of
                                  the registrant)

 /s/ SUE E. GOVE                  Senior Vice President and Treasurer                October 22, 1996
--------------------------- 
     Sue E. Gove                  


 /s/ MARK R. LENZ                 Vice President and Controller                      October 22, 1996
---------------------------       (principal accounting officer 
     Mark R. Lenz                 of the registrant)

 /s/ GLEN ADAMS                   Director                                           October 22, 1996
--------------------------- 
     Glen Adams                              

 /s/ FRANK E. GRZELECKI           Director                                           October 22, 1996
--------------------------- 
     Frank E. Grzelecki                                        


 /s/ ANDREA JUNG                  Director                                           October 22, 1996
--------------------------- 
     Andrea Jung                                               


 /s/ RICHARD C. MARCUS            Director                                           October 22, 1996
--------------------------- 
     Richard C. Marcus                                         


 /s/ ANDREW H. TISCH              Director                                           October 22, 1996
--------------------------- 
     Andrew H. Tisch              

</TABLE>


                                     16


<PAGE>


                     REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors of
Zale Corporation:

We have audited in accordance with generally accepted auditing standards, the 
financial statements included in Zale Corporation (a Delaware corporation) 
and subsidiaries' Annual Report to Stockholders incorporated by reference in 
this Form 10-K, and have issued our reports thereon dated September 9, 1996.  
Our audits were made for the purpose of forming an opinion on the basic 
financial statements taken as a whole.  Schedule II is the responsibility of 
the Company's management and is presented for the purpose of complying with 
the Securities and Exchange Commission's rules and is not part of the basic 
financial statements. This schedule has been subjected to the auditing 
procedures applied in the audits of the basic financial statements and, in 
our opinion, fairly states in all material respects the financial data 
required to be set forth therein in relation to the basic financial 
statements taken as a whole.

                                        ARTHUR ANDERSEN LLP

Dallas, Texas,
September 9, 1996










                                     17

<PAGE>

                                                                    SCHEDULE II

                         ZALE CORPORATION AND SUBSIDIARIES
                         VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                            BALANCE AT           ADDITIONS                       BALANCE AT
                                             BEGINNING           CHARGED TO                          END    
                                             OF PERIOD            EARNINGS        DEDUCTIONS      OF PERIOD
                                            -----------          -----------      ----------      -----------

                                                           (AMOUNTS IN THOUSANDS)

<S>                                          <C>                  <C>               <C>              <C>
Fiscal year ended July 31, 1996
     Allowance for doubtful accounts         $42,596              $ 53,508           $44,702(1)       $51,402

Fiscal year ended July 31, 1995
     Allowance for doubtful accounts          42,708                41,696            41,808(1)        42,596

Fiscal year ended July 31, 1994
     Allowance for doubtful accounts          54,353                36,163           47,808 (1)        42,708

</TABLE>

(1)  Accounts written off, less recoveries and other adjustments.





                         




                                       18

<PAGE>
                                 INDEX TO EXHIBITS
    EXHIBIT
    NUMBER                            EXHIBIT
    ------                            -------
       2.1    Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
              Code with Respect to Plan of Reorganization under Chapter 11 of
              the Bankruptcy Code for Zale Corporation and its Affiliated
              Debtors, dated March 22, 1993 (Exhibit T3E-1). (1)
              
       2.2    Motion to Approve Amendments to the Plan of Reorganization under
              Chapter 11 of  the Bankruptcy  Code of  Zale Corporation  and
              its  Affiliated  Debtors, dated  May 19, 1993 (Exhibit 2.6). (2)
              
       2.3    Order Approving Amendments to the Plan of Reorganization under
              Chapter 11 of the Bankruptcy Code of Zale Corporation and its
              Affiliated Debtors, dated May 20, 1993 (Exhibit 2.7).  (2)
              
       3.1    Restated Certificate of Incorporation of Zale Corporation, dated
              July 30, 1993.  (3)
              
       3.2    Amended and Restated Bylaws of Zale Corporation, dated July 30,
              1993.  (7)
              
       4.1    Warrant Agreement, dated as of July 30, 1993, between Zale
              Corporation and The First National Bank of Boston, as warrant
              agent, governing the Warrants to Purchase Common Stock, Series A.
              (3)
              
       4.2    Indenture, dated as of July 1, 1994, among Zale Funding Trust, as
              Issuer and Bankers Trust Company, as Indenture Trustee.  (6)
              
       4.3    Purchase and Servicing Agreement, dated as of July 1, 1994, among
              Zale Funding Trust, Diamond Funding Corp., Zale Delaware, Inc.,
              and Jewelers Financial Services, Inc.  (6)

       4.4    Revolving Credit Agreement, dated as of August 11, 1995, among
              Zale Corporation, Zale Delaware, Inc., the lending institutions
              set forth therein, and The First National Bank of Boston, as
              Agent for such lenders.  (6)

       4.5    Amended and Restated Lender Security Agreement, dated as of
              August 11, 1995, among Zale Delaware, Inc., Zale Corporation, and
              The First  National  Bank of  Boston, as collateral agent.  (6)
            
  *   10.1    Indemnification agreement, dated as of July 21, 1993, between
              Zale Corporation and certain present and former directors
              thereof.  (6)
             
      10.2    Amended and Restated Agreement of  Limited Partnership of Jewel
              Recovery, L.P., dated as of July 30, 1993.  (3)
              
  *   10.3    Zale Corporation Stock Option Plan.  (3)

      10.4    Trust Agreement, dated as of November 24, 1993, among Zale
              Corporation, Zale Delaware, Inc. and United States Trust Company
              of New York.  (4)
              
      10.5    Agreement for Systems Operations Services, dated as of  February
              1, 1993,  between  Zale Corporation and Integrated Systems
              Solutions Corporation.  (3)
              
      10.5a   Amendment #1 to Agreement for Systems Operations Services,
              dated as of August 1, 1994, between Zale Corporation and
              Integrated Systems Solutions Corporation.  (6)
              
  *   10.6    Severance and Settlement Agreement, dated as of December 3, 1993,
              between Zale Corporation and E. Peter Healey.  (4)
              

<PAGE> 
                                 INDEX TO EXHIBITS
   EXHIBIT
   NUMBER                             EXHIBIT
   ------                             -------



  *   10.7    Severance and Settlement Agreement, dated as of May 15, 1995,
              between Zale Corporation and  Dolph B. Simon.  (6)
              
  *   10.8    The Executive Severance Plan for Zale Corporation and Its
              Affiliates, as amended and restated as of February 10, 1994.  (4)

  *   10.8a   Amendment to The Executive Severance Plan for Zale
              Corporation and Its Affiliates effective May 20, 1995. (7)

  *   10.9    Employment Agreement, dated as of December 22, 1993, between Zale
              Corporation and Larry Pollock.  (4)

  *   10.10   Employment Agreement, dated as of March 14, 1994, between
              Zale Corporation and Robert DiNicola.  (5)

      10.11   Lease Agreement Between Principal Mutual Life Insurance
              Company, As Landlord, and Zale Corporation, as Debtor and
              Debtor-In-Possession, As Tenant, dated as of September 17,
              1992. (7)

      10.11a  First Lease Amendment and Agreement between Principal Mutual
              Life Insurance Company and Zale Delaware, Inc., dated as of
              February 1, 1996. (7)

      11      Statement re computation of per share earnings.  (7)
             
      13      Incorporated   Portions   of   the  Annual   Report to
              Stockholders  for   the year ended  July  31, 1996.  (7)

      21      Subsidiaries of the registrant.  (7)
             
      23      Consent of Independent Public Accountants.  (7)
             
      27      Financial data schedule.  (7)

------------------------

      (1)     Incorporated by reference from the exhibit shown in parenthesis
              to the registrant's Form T-3 (No. 22-24-68) filed with the
              Commission on April 2, 1993.

      (2)     Incorporated by reference from the exhibit shown in parenthesis
              to the registrant's Form 8-A/A (No. 02-21526) filed with the
              Commission on July 16, 1993.

      (3)     Previously filed as an exhibit to the registrant's Form 10-Q (No.
              1-4129) for the quarterly period ended September 30, 1993, and
              incorporated herein by reference.

      (4)     Incorporated by reference to the corresponding exhibit  to the
              registrant's Registration Statement on Form S-1 (No. 33-73310)
              filed with the Commissions on December 23, 1993, as amended.


<PAGE> 
                                 INDEX TO EXHIBITS



          (5)  Previously filed as an exhibit to the registrant's Form 10-K (No.
               0-21526) for the fiscal year ended March 31, 1994, and
               incorporated herein by reference.

          (6)  Previously filed as an exhibit to the registrant's Form 10-K (No.
               0-21526) for the fiscal year ended July 31, 1995, and
               incorporated herein by reference.

          (7)  Filed herewith.

               *   Management Contracts and Compensatory Plans.