By Phil Wahba
Aug 27 Tiffany & Co's strong sales in
China and higher prices made up for some disappointing business
in its home market in the latest quarter, leading the U.S.
jeweler on Tuesday to raise its profit forecast for the year.
There were fears this summer that luxury spending in China
might slow as the economy there weakened, but Tiffany is the
latest Western brand to report good sales there. Prada SpA
and Coach Inc recently posted big gains in the
world's fastest-growing market for luxury goods.
Sales at stores open at least a year in Asia, except for
Japan, rose 13 percent in the second quarter ended July 31,
helped largely by China.
But same-store sales were unchanged in the Americas, which
is still Tiffany's biggest market. This suggests the company may
have faced the same summer pullback by U.S. shoppers that dented
sales at chains ranging from Saks Inc to Target Corp
"Business in the Americas is light," said Edward Jones
analyst Brian Yarbrough. Tiffany continues to struggle with
low-end jewelry sales, he added.
Tiffany executives told analysts on a conference call that
tourists' purchases had helped business tick up at the Fifth
Avenue flagship in New York, which generates about one-eighth of
sales. Elsewhere, though, there was still reason to be prudent,
"We are maintaining a cautious sales outlook for the
Americas until we see solid evidence of an upturn," Chief
Financial Officer Patrick McGuiness said.
Shares of Tiffany rose 0.1 percent to $81.75 in morning
An Ipsos poll conducted for Reuters earlier this month found
35 percent of Americans planned to spend less on jewelry in the
2013 holiday season, while only 5 percent expected to spend
Tiffany said it still expected net sales worldwide to
increase by a mid-single-digit percentage rate for the year,
including the effect of the strong dollar.
The company has struggled to find the right mix of the
expensive jewelry for which it is known and the more-affordable
silver items, typically less than $500, that generate 25 percent
of sales and comprise its most profitable category.
Still, the pickup in business outside the Americas, where
Tiffany is focusing its expansion, reassured Wall Street that
the jeweler's growth prospects remain good, Yarbrough said.
Sales in Asia outside Japan now account for about 22 percent
of overall revenue, compared with 11 percent five years ago.
The company, famed for its robin's egg blue boxes, said
global sales rose 4.4 percent to $925.9 million in the second
quarter, below the $941.4 million analysts were expecting,
according to Thomson Reuters I/B/E/S.
Sales growth would have been 8 percent if not for the strong
U.S. dollar, which reduces the value of goods sold overseas.
Same-store sales climbed 5 percent, in line with estimates.
Excluding currency fluctuations, they were up 7 percent in
Europe and 8 percent in Japan.
Despite strong demand for high-end jewelry in Japan, overall
sales there fell 14 percent because of the weak yen.
Second-quarter net income rose to $106.8 million, or 83
cents per share, from $91.8 million, or 72 cents per share, a
Per-share profit beat the average Wall Street estimate by 9
cents, helped by lower pressure from diamond and gold costs.
Tiffany said price increases in some categories had not
The company now expects a profit of $3.50 to $3.60 per share
for the full fiscal year, up 7 cents from its previous forecast
Last year, Tiffany's shares came under attack after it
repeatedly lowered its forecasts.