* Expects global sales to rise 6-8 percent this fiscal year
* Quarterly profit beats Wall Street estimates
* Shares up 2.7 percent
By Phil Wahba
March 22 Tiffany & Co said the pace of
its worldwide sales growth would pick up this year, helped by
faster growth in Asia and a more compelling selection of
lower-price silver jewelry.
The forecast of 6 percent to 8 percent sales growth points
to a return to the more robust gains Wall Street has come to
expect from Tiffany, which also reported a higher-than-expected
quarterly profit on Friday. Sales suffered last year from weak
demand for its silver items and a slowdown in China.
Tiffany's shares rose nearly 3 percent, although Chief
Financial Officer Pat McGuiness acknowledged the forecast was
still below the company's long-term goal of annual sales growth
of 10 percent to 12 percent.
"It's relief that things are normalizing in China and in its
silver jewelry," Morningstar analyst Paul Swinand said.
The New York company had lowered its own projections several
times in the last year, including after weak holiday sales. This
raised fears that its torrid growth of recent years was over.
Tiffany, famed for its blue boxes, said it expected sales in
Asia, excluding Japan, to rise at a mid-teens percentage rate
this year, compared with an 8 percent increase last year.
In recent weeks, fashion brands Burberry Group and
Hugo Boss AG, handbag maker Coach Inc and
Swiss watchmaker Swatch Group SA have also said they
were upbeat about China.
The renewed confidence was in stark contrast to some top
European luxury brands. British handbag maker Mulberry
issued a profit warning on Friday because of drop in spending by
tourists, and Danish luxury stereo and television maker Bang &
Olufsen cut its revenue outlook.
THE RIGHT MIX
Tiffany has struggled to find the right mix between the
expensive statement jewelry it is famous for, and the
more-affordable silver items that generate one-quarter of sales
and comprise its most profitable category. Silver sales sagged
last year as price-conscious shoppers pulled back on
Many Wall Street analysts have said Tiffany has hurt itself
by failing to offer shoppers compelling jewelry in that
category. The retailer said it would ramp up those offerings.
"While maintaining the right strategic balance remains
critical, you will see a range of exciting new designs in 2013
including silver sterling silver with entry-level price points
below $500," Chief Executive Officer Michael Kowalski said on a
Some of that will be part of a new collection timed for the
spring premiere of the motion picture "The Great Gatsby." The
line will also include more-expensive jewelry, like diamond and
Tiffany's forecast implies a sales range this year of $4.02
billion to $4.1 billion, mostly above the $4.03 billion Wall
Street analysts were projecting, according to Thomson Reuters
Global sales rose 4.1 percent to $1.24 billion in the fourth
quarter ended Jan. 31, while sales at stores open at least a
year were unchanged. The results were consistent with the
November-December sales that Tiffany reported right after the
Still, Tiffany said sales fell 3 percent at its Fifth Avenue
flagship store in Manhattan. That compares with a 2 percent drop
in the first two months of the quarter, suggesting worsening
trends in January.
"There is still plenty of global economic uncertainty," CFO
McGuiness said on the call.
While Tiffany shares were up 2.7 percent at $69.72 in
morning trading, they were still down from a year ago.
During the quarter, earnings rose to $179.6 million, or
$1.40 per share, from $178.4 million, or $1.39 a share, a year
earlier. The results beat analysts' estimates by 5 cents a
Besides the slump in silver jewelry, higher diamond and gold
prices pressured Tiffany's gross margin. The retailer refrained
from raising prices last year, aware of shoppers' caution about
spending, but McGuiness said it was doing so this year.
The company forecast a profit of $3.43 to $3.53 per share
this fiscal year. Wall Street analysts were expecting $3.50.
As Tiffany's same-store sales cooled last year, many Wall
Street analysts wondered if the retailer was expanding too
But Tiffany said on Friday that it planned to open 15 stores
this year, including seven in Asia. It will close one store in
Japan, its second-largest market, but one of its slowest-growing
Tiffany will also restart its Web site to spur online sales,
which last year accounted for 6 percent of revenue.