(Reuters) - Tiffany & Co (TIF.N) reported an unexpected rise in second-quarter profit as it sold more jewelry in Britain and the upscale jeweler benefited from lower costs of gold and other precious metals.
Total net sales, however, fell 6 percent - the seventh straight quarter of declines. Same-store sales fell 8 percent, steeper than was expected.
While the company has taken a hit due to muted tourist spending in the past several quarters, a sharply lower pound following the British vote to exit the European Union encouraged tourists in the country to loosen their purse strings.
“We saw an uptrend in the UK sales almost immediately following the vote,” vice president of investor relations, Mark Aaron, said on a conference call.
“We believe that the weakening of the pound has made London a more attractive tourist shopping destination.”
Shares of the company rose 8 percent to $74.46, their highest in nearly eight months and biggest intra-day percentage gain in about 16 months.
Europe, which accounted for nearly 12 percent of the company’s total net sales in the quarter, is its smallest business in terms of geography. Tiffany does not break out UK sales.
The company, which makes the iconic “Tiffany Setting” diamond engagement ring, has been struggling to get back in the good books of wealthy American consumers, and woo hard-to-please millennials who are taking their business to cheaper and hipper shops.
“The global environment continues to reflect well known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists, especially from China,” Chief Executive Frederic Cumenal said in a statement.
Lower tourist spending has also dented sales at luxury retailers such as Michael Kors Holdings Ltd KORS.N and Kate Spade & Co KATE.N.
Signet Jewelers Ltd (SIG.N), which sells jewelry at lower prices than Tiffany, on Thursday reported an unexpected drop in comparable sales for the quarter due to weaker demand for its Sterling and Zale lines.
Tiffany benefited from lower gold, silver and platinum prices, and also the sale of more high-margin jewelry, in the May-July quarter.
While precious metal prices have risen sharply this year, they fell to multi-year lows last year, and it takes jewelry companies 9-12 months to make and get products to its shelves, Edward Jones analyst Brian Yarbrough said.
Tiffany’s net income inched up to $105.7 million, or 84 cents per share, in the quarter ended July 31 from $104.9 million, or 81 cents per share, a year earlier.
Analysts on average were expecting profit 72 cents per share, according to Thomson Reuters I/B/E/S.
Tiffany maintained its full-year profit forecast of a net sales falling in the low single-digits in percentage terms, and earnings per share declining in the mid-single-digit percentage range.
Total net sales in the second quarter fell to $931.6 million, lower than analysts’ expectation of $934.74 million.
Reporting by Subrat Patnaik in Bengaluru; Editing by Savio D'Souza and Sayantani Ghosh