TIFFANY & CO.
Despite a 29.7 percent decline in second-quarter profits, Tiffany’s shares rose more than 11 percent as the jeweler beat analysts’ expectations for the quarter just ended and lifted guidance for the remainder of the year.
Net income for the quarter ended July 31 fell to $56.8 million, or 46 cents a diluted share, compared with earnings of $80.8 million, or 66 cents a share in the year-ago period. Sales slid 16.1 percent to $612.5 million from $729.6 million in 2008, as comparable-store sales declined 17 percent or 16 percent on a constant exchange rate basis. Analysts expected earnings of 33 cents on sales of $602.1 million, according to Yahoo Finance.
Gross margin fell slightly, to 55.1 percent of sales from 55.5 percent a year ago.
Shares closed Friday at $37.57, up $3.82 or 11.3 percent.
For the first half, Tiffany posted a 44.1 percent decline in profit to $81.1 million, or 68 cents a diluted share, versus net income of $145.2 million, or $1.18 a share, in 2008. Revenue slumped 19 percent to $1.13 billion from $1.40 billion.
The retailer said it anticipates sales for the full year to decline about 10 percent, but said earnings from continuing operations would range from $1.65 to $1.75 a diluted share, up from the $1.50 to $1.60 previously projected.
“Tiffany’s results show high-end jewelry trends are setting a bottom,” said Jeffries & Co. retail analyst Randal Konik. “Management is also doing an exceptional job with cost and inventory control and new product development.”
In the Americas, quarterly sales declined 23 percent to $324.9 million as total U.S. retail sales slid 26 percent, due to “roughly equal declines in a number of transactions and in the average transaction size,” said vice president of investor relations Mark Aaron, who added the company noted a small improvement in the customer conversion rate “for the first time in quite a while.”
Comps in the U.S. fell 27 percent, and sales in the New York flagship shrank 30 percent, identical to the decline at the Wall Street store.
In Europe, revenue slid 4 percent to $68.3 million, as comps contracted 10 percent but were up 5 percent on a constant exchange rate basis, outpacing Tiffany’s expectations. Stores in continental Europe brought in positive comps, with Italy earning the largest increases. Tiffany’s London flagship also reported positive comps.
In the Asia-Pacific region, sales declined 1 percent to $211.9 million. Comp-sales dipped 2 percent, or 4 percent on a constant exchange basis, as growth elsewhere in the region was offset by soft sales in Japan, which posted a 1 percent drop in comps, or an 11 percent decline at constant exchange.
“Summing it all up, we believe that Tiffany is weathering this challenging environment and is positioned well going forward,” said James Fernandez, executive vice president and chief financial officer. “Our brand is respected and desired. Our product designs are renowned and we have a well-developed infrastructure and strong financial position to pursue growth.”
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