Tiffany & Co. Shines With 50% Q3 Profit Jump

Christmas at Tiffany & Co.New York—Shares of Tiffany & Co. jumped to all-time highs earlier today after the retail jeweler posted a 50% increase in its third quarter profit with strong sales especially in China.

For the quarter ended Oct. 31, Tiffany posted net earnings rose of $95 million, or 73 cents a share, compared with $63 million, or 49 cents a share, a year ago. That was well ahead of analysts’ average estimate expecting a profit of 58 cents a share.

Net sales increased 7% to $911 million, or rose 11% on a constant exchange rate basis. Comparable store sales rose 7% thanks to growth seen in all regions.

Raises Full Year Outlook

Total sales in the Americas region increased 4% to $417 million while comparable store sales in the Americas were up 1% due to strong results from Tiffany’s New York flagship.

In the Asia-Pacific, total sales grew 27% to $238 million, helped by comparable store sales growth of 22%. However, in Japan, the negative translation of a weaker yen versus the dollar resulted in a 13% sales decline to $128 million. Using constant exchange rates, however, Japan sales rose 9% as comparable store sales gained 5%.

Sales in Europe rose 7% to $104 million, led by sales in the United Kingdom, as comp store sales rose 2%.

“We are very pleased with our overall results. Worldwide sales growth in the quarter demonstrated the growing power of the Tiffany & Co. brand and the benefits of  our expanding global presence,” said Michael J. Kowalski, chairman/ceo.

“Operating earnings rose faster than sales, reflecting favorable product cost trends and ongoing well-controlled expenses. We’re experiencing excellent customer response to our expanded fashion jewelry designs, highlighted by the Atlas collection, as well as continued growth in our fine and statement jewelry, with particular strength in our yellow diamond collection.”

Gross profit as a percentage of net sales increased 2.6 points to 57%, from 54.4% a year ago largely the result of reduced product cost pressure, as well as price increases that Tiffany & Co. implemented in earlier this year. The company also observed a shift in the sales mix toward higher-priced, lower gross margin products has continued to offset a portion of these benefits.

Selling, general and administrative expenses increased 5% largely due to incremental labor and store-related costs, and rose 6% in the year-to-date.

The strong results led Tiffany to increase its full year net earnings in the range of $3.65 to $3.75 a share, well above its prior forecast of $3.50 to $3.60 a share. In 2012, the company earned $3.25 a share. Worldwide sales are expected to increase by a mid-single-digit percentage.

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com