Luxury Earnings: Neiman Marcus, Tiffany & Co. Report Profit Rises

Neiman Marcus Inc. Q3 Profit Doubles As Margins, Sales Improve

Dallas—Neiman Marcus, Inc.’s third-quarter earnings more than doubled as the luxury retailer’s margins improved on continued sales growth.

Results reported today by the company, which operates Neiman Marcus and Bergdorf Goodman, were in line with other luxurygoods retailers that have found their affluent shoppers returning to buy as the economy and the stock market improves.

For the quarter ended April 30, Neiman Marcus reported a profit of $46.2 million, up from $18.5 million a year earlier. Gross margin grew to 39.7% from 38.2%.

Total sales were up 9.9% to $983.8 million from $895.2 million in the third quarter last year. Same-store sales increased 9.7%.

Sales in Neiman’s specialty retail segment rose 8.6% as operating earnings jumped 23%. The direct-marketing segment, which includes Internet and catalog sales, saw a 16% rise in both sales and profits.

Operating income increased 45% to $123.2 million from $85.3 million in the same period last year. Earnings before interest, taxes and other items increased 23% to $169.9 million from $138.3 million a year ago.

Interest expense dropped 13%. The company ended the period with long-term debt of $3.91 billion, down 2.4% from a year earlier. The heavy debt load resulted from the $5.1 billion leveraged buyout by its current owners, private-equity investors TPG Capital and Warburg Pincus LLC. The company is privately held but reports quarterly financial results because it has publicly traded debt.

 

Tiffany 1Q Profit Climbs 26%, Raises Year Forecast

New York–Tiffany & Co. reported Thursday that its first quarter earnings rose 26%, helped by continued double-digit sales increases that exceeded the luxury jeweler’s expectations.

For the quarter ended April 30, Tiffany reported a profit of $81.1 million, or 63 cents a share, up from $64.4 million, or 50 cents, a year earlier. Excluding items, earnings rose to 67 cents from 48 cents. (The most-recent quarter included a headquarters relocation charge of 4 cents, while the year-earlier quarter included a 2-cent tax benefit.)

Sales jumped 20% to $761 million. Excluding currency fluctuations, they rose 16%. The results bested Tiffany’s own forecast in March that projected per-share earnings of 57 cents on an 11% sales increase. And it exceeded analysts’ average estimate that expected earnings of 57 cents a share on revenue of $702.6 million.

Gross margin rose to 58.3% from 57.8%. Total same-store sales rose 19%, or 15% on a constant-exchange-rate basis.

Price Increases in Various Categories, Across Various Countries

On a global basis, all major jewelry categories posted double-digit percentage sales growth in the quarter, Mark Aaron, investor relations chief said in a conference call with analysts.

While discretionary spending by affluent consumers who are buying diamond and gold jewelry is increases, Aaron cautioned that the company’s sterling silver jewelry business may face some uncertainty in the United States where “spending will likely remain challenging for a while.”

Like other retailers, Tiffany also has to increase prices to offset rising diamond and precious metals costs and plans to continue raising prices in various categories and across various countries.

Aaron noted, however, that Tiffany saw its comparable store sales growth in double-digit percentages all three months of the quarter and “the trend strengthened” as the period progresses, Aaron said. Comparable store sales at the New York flagship store, for instance, rose 23% on top of a 26% rise the prior year.

Every geographic segment saw double-digit sales growth. In the United States, Canada and Latin America, sales increased 19% to $374.7 million. On a constant-exchange-rate basis, comparable-store sales rose 17%, including a 15% increase in comparable Americas’ branch stores. Combined Internet and catalog sales in the Americas rose 14%.

Asia-Pacific sales increased 37% to $167.2 million and would have been up 31% minus currency translations. Comparable store sales rose 26% due to substantial growth in most countries and especially in the greater China region.

Sales in Japan rose 7% to $123.4 million. While comparable store sales in March fell 16% due to the impact of the March 11 earthquake, the company’s sales have since rebounded 6% in April as stores reopened for business.

In Europe, sales increased 25% to $85.6 million. On a constant exchange-rate, sales increased 19% while comparable store sales rose 15%, led by gains in France, Germany and Italy and modest sales growth in the United Kingdom.

The company said it plans to open 19 new stores and increase marketing spending among its growth strategies for the year, a move applauded by analysts.

“They are positioning themselves in markets where there is strong potential growth and that bodes well for the company’s continued success,” Agata Kaczanowska, retail analyst at IBISWorld, told the Wall Street Journal.

Citing its sales increases, Tiffany raised its full-year outlook to a range of $3.45 to $3.55 a share from a previous forecast of as much as $3.45 a share.

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