NEW YORK (Reuters) - U.S. jewelers are confident they will prevail this holiday shopping season, betting that upscale and middle-income customers won't resist buying baubles despite a weak economy.
High-end brand Tiffany & Co (TIF.N) posted a better-than-expected profit on Thursday, helped by strong sales overseas. The company raised its full-year forecast and expects its same-store sales in the sluggish U.S. jewelry market to grow in the key fourth quarter.
Zale Corp's ZLC.N reported a lower-than-expected loss and forecast a profit for the current fiscal year that beat Wall Street expectations. The company said it will focus less on discounts and more on new products, which it expects will lure shoppers to its stores during the upcoming holidays.
Tiffany shares rose 11 percent, while Zale surged more than 20 percent.
Tiffany's U.S. sales have lagged recently as consumers cut back on discretionary purchases, though its higher-income clientele tends to be less affected by economic concerns than people who frequent more hard-hit jewelers such as Zale, Finlay Enterprises FNLY.OB and Signet Group (SIG.L).
Analysts remained wary of Tiffany's optimism, but said the company was more likely to succeed in the holidays than Zale.
"It is possible that if they (Tiffany) have just the right merchandise, they can still have good sales, whereas Zale (deals) with middle America, and middle America doesn't have enough food on the table," said Gary Giblen, a Goldsmith & Harris analyst who follows both companies.
EUROPE, ASIA HELPS TIFFANY
Edward Jones analyst Stephanie Hoff expressed doubts about Tiffany's outlook for fourth-quarter U.S. same-store sales.
"I wish they had not been so bold as to say they will have positive comps in the fourth quarter," said Hoff, calling the U.S. market "still troubled."
Tiffany's net profit nearly doubled to $80.8 million, or 63 cents per share, in its fiscal second quarter. Analysts forecast profit of 55 cents per share, according to Reuters Estimates.
Tiffany's sales rose 11 percent to $732.4 million. Sales in the Americas, which includes the United States, Canada and South America, rose 3 percent, helped by new stores.
U.S same-store sales fell 4 percent, but shoppers abroad remained unfazed. Same-store sales rose 11 percent in Europe and 1 percent in the Asia-Pacific region.
Tiffany expects worldwide sales to grow about 9 percent in the year, fueled by Europe and the Asia-Pacific region, excluding Japan.
It raised its full-year earnings outlook to a range of $2.82 to $2.92 per share. Previously, it had forecast per-share earnings of $2.80 to $2.90.
ZALE VIEW BEATS
Dallas-based Zale has suffered in recent months as even its most avid shoppers resist buying jewelry due to rising prices for necessities like food and fuel. But it expects that sentiment to soften come holiday time.
"We understand our sweet spot is value, which is a great place to be in the current environment," said Zale Chief Executive Neal Goldberg on a conference call.
But not everyone shared Zale's optimism.
"The holidays is really where you have to get volume and they are going to be defeated by the macro environment," Giblen said.
Zale's fiscal fourth-quarter loss was $4.9 million, or 15 cents per share, compared with a profit of $1.5 million, or 3 cents a share, a year earlier. Excluding items, the loss was 48 cents a share, below the 57 cents a share analysts expected.
Total sales at Zale rose 6.1 percent to $456.2 million. Same-store sales also rose 6.1 percent.
The company said it expects to earn $1.10 per share to $1.25 per share for the full-year ending in July 2009, above Wall Street's forecast of 90 cents per share.
Tiffany gained $4.32 to $43.93. Zale rose $4.68 to $27.83.
(Editing by Brian Moss and Steve Orlofsky)