Tiffany Q4 Beats Estimates, Predicts 2013 Sales to Rise 6% to 8%

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

Tiffany & Co.New York—Tiffany & Co. today forecast sales growth of 6% to 8% with improved sales in Asia and a promising new sterling silver jewelry collection at entry pricepoints.

While the return to more robust sales by blue box jeweler was warmly received by Wall Street analysts this afternoon, Pat McGuiness, chief financial officer, admitted the forecast was still below Tiffany’s long-term goal of annual sales increases of 10% to 12%.

In its fourth quarter ended Jan. 31, Tiffany posted net income of $179.6 million, or $1.40 a share, compared to $178.4 million, or $1.39 a share, in the year-ago quarter. That was better than analysts’ average estimate for $1.36 a share.

Total global sales rose 4.1% to $1.24 billion. Comparable store sales were flat.

The company saw stronger demand in Asia that offset some of the weakness in the U.S. market.

Fourth quarter sales in the Americas increased 2% to $620 million and in the full year it was up by 2% to $1.8 billion. Comp store revenue declined 2% in both the fourth quarter and full year at constant exchange rates.

At Tiffany’s Fifth Avenue flagship, sales fell 3% during the quarter.

Total sales in Asia-Pacific rose 14% to $254 million in fourth quarter and 8% to $810 million in the full year. Total sales in Japan declined 6% to $192 million in the quarter.

New Sterling Silver Jewelry Below $500

Besides the lower than expected sales, the company also faced increased gross margin pressure as gold and diamond prices rose. Gross margin narrowed 50 basis points to 59.1%. Net inventory rose 8% to $2.2 billion.

While Tiffany expects its global net sales to increase 6% to 8% in 2013 and net earnings to rise 6% to 9% to $3.43 to $3.53 a share (analysts expect $3.50 a share), first quarter earnings may take a hit of 15% to 20% due to margin pressure and increased marketing costs.

Tiffany also plans to expand its silver jewelry collection which accounts for about 25% of its sales and is most profitable. Analysts said that the company missed out in 2012 by failing to offer enticing silver jewelry to satisfy price-conscious shoppers.

“While maintaining the right strategic balance remains critical, you will see a range of exciting new designs in 2013 including sterling silver with entry-level price points below $500,” Michael Kowalski, chairman/ceo, said on a conference call with analysts.

Like other luxurygoods companies, Tiffany sees Asia, excluding Japan, as its biggest sales potential this year. Sales in Asia-Pacific are expected to rise in the mid-teens percentage compared to 8% in 2012. The company also plans to open 7 of its 15 new stores this year in Asia, and will also revamp its website which accounted for 6% of sales last year.

“It’s relief that things are normalizing in China and in its silver jewelry,” said Paul Swinand, analyst at Morningstar.

But as McGuiness cautioned on the conference call: “There is still plenty of global economic uncertainty.”


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