Tiffany Q2 Up Modestly, Lowers Forecast

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New York–Tiffany & Co. today reported modest gains in sales and earnings but lowered its outlook on sales growth citing continued economic weakness in the United States and Europe.

For the quarter ended July 31, Tiffany reported earnings rose 2% to $92 million, or 72 cents a share, compared with $90 million, or 69 cents a share, a year ago. The result missed average analysts estimate by a penny.

Net revenue rose 2% to $887 million, up from $873 million a year ago, but below analysts’ average estimate for $890.9 million, while comparable store sales fell by 1%.

The 2011 period had included a $21 million charge, or an impact of about 16 cents a share, related to the relocation of Tiffany’s New York headquarters. Excluding those costs, Tiffany said net earnings in the 2012 second quarter declined 17% year-over-year.

“Great Gatsby”Jewelry Postponed Till 2013

Sales increased 11% to $159 million in Japan but fell 1% in both the Americas region and in Europe. In the United States, by far its largest market, comparable store sales declined by 5%.

Tiffany maintained a cautious near-term outlook about global economic conditions and consumer spending. For fiscal 2012, the company sees earnings in the range of $3.55 to $3.70 a share while analysts’ consensus expects $3.64 a share.

“Management continues to expect an earnings decline in the third quarter followed by a resumption of growth in the fourth quarter,” Tiffany said in a statement.

The company lowered its view on worldwide sales growth for the full year ending in January 2013 to a range of 6% to 7% from its earlier view of 7% to 8% growth.

“These second quarter results met the expectations contained in our previously-reported financial guidance,” said Michael Kowalski, ceo. “Not surprisingly, sales growth has been affected by economic weakness in a number of markets and by a very challenging prior-year comparison to a 30% increase in worldwide net sales. We also anticipated the reduced operating margin in the quarter, adjusted for nonrecurring items, due to continued, but moderating, high product input costs and a lack of sales leverage on fixed costs. The resulting decline in net earnings, when compared with last year’s earnings excluding nonrecurring costs, was in line with our expectations and was on top of a 58% increase in last year’s second quarter.”

The jeweler said it had also been anticipating the reduced operating margin due to what it called continuing but moderated high product input costs and lack of sales leverage on fixed costs. Gross margin was 56.3% in the second quarter compared with 59% last year.

In its second half, Tiffany plans to open its new store in Manhattan’s SoHo neighborhood; a second store in San Francisco in the San Francisco Centre; a store in La Jolla, California; a store in Rio de Janeiro and a third store in Toronto in Sherway Gardens.

In addition, the company completed an agreement to directly operate four existing Tiffany boutiques within Holt Renfrew department stores that were previously operated on a wholesale basis. Earlier this month, the company assumed control of stores in Ottawa, Montréal and Calgary, and will begin to operate a shop in their Vancouver store later in the year.

As far as new product introductions in the second half, Tiffany will be introducing the new Enchant jewelry collection, with designs inspired by the natural world and crafted in platinum and diamonds with rose gold and tanzanite. Plans also call for expanding yellow diamond jewelry assortments and introducing pink diamond accents into collections.

Tiffany also is postponing the launch of “Great Gatsby” jewelry collection after the film was pushed back until mid-2013.


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