UPDATE 3-Tiffany's U.S. sales on the mend; shares rise

Fri Mar 21, 2014 11:17am EDT

(Adds details from conference call)

By Phil Wahba

March 21 (Reuters) - Tiffany & Co forecast more sales growth this year amid signs that the jeweler's business in its home U.S. market is finally perking up.

The retailer, known for its Robin egg blue boxes and Fifth Avenue flagship store in Manhattan, said on Friday that it expects global net sales, excluding the impact of currency fluctuations, to rise by a "high-single" digit percentage this year, after climbing 10 percent last year.

Shares rose 2.7 percent to $93.64 in morning trading.

Tiffany reported a companywide 6 percent increase in sales at stores open at least a year for the fourth quarter, which ended Jan. 31.

The New York-based jewelry chain has had sluggish sales in the last year in the United States, where many shoppers, particularly its more frugal customers, spent less.

Specifically, the company has struggled with sales of silver jewelry and items costing less than $500, which have a higher profit margin than more expensive jewelry and account for a quarter of its sales.

That trend started to abate during the holiday quarter, and comparable sales in the Americas rose 7 percent, prompting a Tiffany spokesman to say on a conference call that the company was "encouraged." It was the fastest pace of growth by far for fiscal 2013 in the region.

"They could finally be starting to turn the corner," said Edward Jones analyst Brian Yarbrough.

Last year, Tiffany hired a new design director, Francesca Amfitheatrof, in part to improve its lower-price assortment, and Yarbrough said there were signs that category was starting to catch on with shoppers. She had developed jewelry for fashion brands, including Chanel, Fendi and Marni, prior to joining Tiffany

At its Fifth Avenue store, which accounts for 8 percent of sales, an increase in tourism from China and higher spending by European visitors boosted sales. The store gets almost half of its sales from foreign visitors. Other U.S. stores saw modest sales gains after stagnating earlier in the year.

Tiffany said that its pricey fine jewelry led its sales growth worldwide.

Comparable store sales rose 4 percent in Asia, excluding Japan, led by gains in China, where Tiffany has been focusing much of its expansion. Sales had been tepid in the region in November and December, but business picked up in January, partly helped by the earlier timing of Chinese New Year.

In Europe, sales rose 2 percent while in Japan comparable sales rose 8 percent, excluding a sharp drop in the value of the yen.

Overall sales rose 5.1 percent to $1.3 billion.

Tiffany also forecast a profit of $4.05 to $4.15 per share this fiscal year, below Wall Street estimates for $4.28 a share, according to Thomson Reuters I/B/E/S.

Analysts said that after a painful 2012, when Tiffany lowered its bullish profit forecasts four times, the company has grown more cautious in its projections.

The upscale New York-based jeweler reported a loss of $103.6 million, or 81 cents per share, in the fourth quarter, due primarily to losing an arbitrations ruling against Swatch Group . A year earlier, it recorded a profit of $179.6 million, or $1.40 a share.

Excluding the arbitration loss, which wiped out more than half of its 2013 profit, Tiffany earned $1.47 per share in the quarter, 5 cents below Wall Street expectations.

Tiffany is slowing its store expansion, increasing its fleet by nine stores in 2014, after 14 last year, a move hailed by Oppenheimer & Co analyst Brian Nagel in a research note. (Reporting by Phil Wahba in New York; Editing by Jeffrey Benkoe and Phil Berlowitz)

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