Overseas sales lift profit at Tiffany
NEW YORK: Tiffany, the U.S. jewelry company, posted higher-than-expected quarterly profit on Monday as increased sales overseas and new stores helped offset the effect of a weaker U.S. economy that has strained consumer spending.
The shares of the company jumped more than 13 percent after it also gave a strong earnings outlook for the current fiscal year and forecast robust sales growth in overseas markets other than Japan.
Still, Tiffany maintained a cautious stand on U.S. sales, as it continued to expect earnings to be pressured in the first and second quarters.
The company, like mid-tier rivals Zale and Finlay Enterprises, saw sales at established U.S. stores drop in the November-December holiday period as shoppers, faced with a weak economy, cut back on purchases of jewelry and other discretionary items.
But domestic sales benefited from scores of tourists, especially from Europe, who took advantage of the weak dollar and shopped actively in Tiffanys flagship location in New York and at stores in cities like San Francisco and Las Vegas.
International sales rose 21 percent during the fourth quarter ended on January 31.
The company, which will unveil the first of its smaller format stores in the Los Angeles market this year, opened 17 new stores worldwide during the past fiscal year.
Tiffany said it expected net earnings per share of $2.75 to $2.85 for the current year, up from a previous outlook of $2.50 to $2.55. Analysts on average were expecting $2.49, according to Reuters Estimates.
The brighter outlook was partly based on a change in the way inventory is valued, a spokesman said.
Tiffany did not change its forecast for a 10 percent rise in sales from $2.9 billion in the previous 12 months.
The company forecast same-store sales growth at a low-single-digit percentage rate in the United States and in the mid-single-digits internationally.
“I think that there is more stability to the business than we might expect,” said Stifel Nicolaus analyst David Schick, who has a “buy” rating on its shares.
He said it was better for retailers to be conservative rather than optimistic in 2008, given the state of consumers.
Fourth-quarter net income fell 16 percent to $118.3 million, or 89 cents a share, from $140.5 million, or $1.02 a share, a year earlier.
But excluding special items, earnings were $1.27 a share, 6 cents higher than the analysts average forecast compiled by Reuters Estimates.
Items included charges for discontinuing some watch models after a tie-up with Swatch Group and loans made to Tahera Diamond.
Sales rose 10 percent, or 7 percent on a constant-currency basis, to $1.05 billion in the quarter.
U.S. retail sales rose 4 percent to $527.9 million.
Schick said Tiffanys business seemed to be more stable than expected, given the uncertainty about the consumer, and agreed international sales and tourists played an important role.
New York-based Tiffany declined to comment on the cost of precious metals, but said it was “modestly benefiting” from a hedging program that takes care of a part of its platinum and silver requirements.
Tiffany has said it will raise retail prices as necessary, as commodity costs increase.
Tiffany shares were up $5.16, or 13.4 percent, at $43.76, in afternoon trading after rising as high as $44.38 earlier on the New York Stock Exchange.
