Tiffany holiday sales fall short; Signet, Zale miss

A woman walks past a Tiffany & Co. jewelry store at the Iguatemi mall in Sao Paulo July 29, 2011.

(Reuters) - Tiffany & Co (TIF.N) sales over the holiday season weakened markedly in the United States and Europe, prompting the upscale jeweler to lower its full-year profit forecast and sending its shares down more than 10 percent.

Layoffs and smaller bonuses on Wall Street and in London's City, as well as the debt crisis in the euro zone, have cast a pall on high-end jewelry spending in two of Tiffany's most important markets.

The disappointing holiday sales followed signs of a slowdown for Tiffany in November, reflecting how even more affluent consumers are being careful.

"It's faster than I expected," Morningstar analyst Paul Swinand said of the decline in the rate of Tiffany's growth.

Citing the softer sales, Tiffany said it expects to earn $3.60 to $3.65 per share for the year ending January 31, down from its earlier forecast of $3.70 to $3.80. The average analyst forecast was for earnings per share of $3.76, excluding items, according to Thomson Reuters I/B/E/S.

It was the first time Tiffany cut its profit forecast since 2009, Collins Stewart said in a research note.

Further down the price spectrum at stores like Zale Corp (ZLC.N) and Signet Jewelers Ltd (SIG.N), sales gains during the Christmas period, which accounts for about 30 percent of annual sales, also showed signs of slowing.

Zale's same-store sales gains were considerably smaller in December compared to November, while Signet's holiday numbers came in slightly below analyst estimates. Signet shares were down 6.1 percent, while Zale's were down 5.7 percent.

Sales at Tiffany's famed flagship on New York's Fifth Avenue, which accounts for about 8 percent of revenue, fell 1 percent in November and December. The decline would have been worse were it not for international tourists, Tiffany said.

In Europe, sales at stores open at least a year fell 4 percent, hurt in particular by a weak British market, which is also reliant on banker bonuses.

Tiffany got some relief in Asia, where sales excluding Japan rose 19 percent to $165 million.

For November and December, Tiffany's net worldwide sales rose 7 percent to $952 million, a slower pace than last year's 11 percent. Company wide, same-store sales were up 4 percent for the period.

Tiffany shares, which were down $7.04 to $59.90, have fallen 28 percent since hitting a yearly high in early July.

WALL STREET, EUROPE WEIGH

In October, the New York state comptroller said Wall Street bonuses were likely to drop for a second straight year in 2011 and that there would be layoffs in the financial industry in 2012, prompting speculation that sales of luxury goods would suffer.

Tiffany Chief Executive Michael Kowalski cited "restrained spending" on jewelry in the United States and Europe.

Other luxury retailers, such as Saks Inc (SKS.N) and Nordstrom Inc (JWN.N), have reported strong holiday numbers. High-end shoppers typically pull back on expensive jewelry before they start skimping on wardrobe purchases.

At Signet, holiday sales at its U.S. stores open at least a year rose 9.2 percent, with gains of about 10 percent at its Kay Jewelers and its higher-end Jared chain, its two largest. But overall sales at its regional chains fell 4.5 percent, pulling down the company's over-all gains.

That shortfall spilled over into Signet' profit forecast. Signet expects to earn between $3.67 and $3.72 per share for the fiscal year ending January 31, below analysts' average forecast of $3.73, according to Thomson Reuters I/B/E/S.

Signet, which gets 80 percent of its sales in the United States, said same-store sales rose 1.8 percent at its British chains over the holidays.

Zale's same-store sales rose 9 percent in the United States at its Zale's and Gordon's chains. Companywide, they rose 5.9 percent. But after gaining more than 10 percent in November, the pace slowed to 4.2 percent in December.

(Reporting By Phil Wahba; Editing by John Wallace, Mark Porter and Gunna Dickson)