Bloomberg News

Tiffany Falls After Citing ‘Weaknesses’ in Europe, Eastern U.S.

November 29, 2011

Nov. 29 (Bloomberg) -- Tiffany & Co., the world’s second- largest luxury jewelry retailer, fell in early trading after citing “weaknesses” in sales in Europe and the eastern U.S. as the holiday season began.

Tiffany dropped 7.7 percent to $67.95 at 8:12 a.m. in New York. The shares had gained 18 percent this year before today.

The company reiterated its forecast for an annual sales gain in the “high-teens” in percentage terms, after reporting a 21 percent jump in third-quarter revenue, according to a statement today. Tiffany also said a key measure of profitability shrank because it sold more higher-priced jewelry that yields a lower gross margin.

“We are, of course, mindful of continued short-term economic challenges and uncertainties in some markets,” Chief Executive Officer Michael Kowalski said in the statement. “Worldwide sales-to-date at this relatively early stage of our November-December holiday season are tracking in-line with our current expectations despite recent sales weaknesses in Europe and in the eastern part of the U.S.”

Gross margin, or the percentage of sales left after the cost of goods sold, shrank to 57.9 percent from 58.5 percent a year earlier. David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore, had estimated 59 percent.

“The luxury consumer is slowing down as you might expect given the financial market turmoil,” Schick said in a telephone interview. “There was a lot of momentum in sales in the third quarter and that has clearly slowed down.”

Profit Forecast

Net income in the three months ended Oct. 31 climbed 63 percent to $89.7 million, or 70 cents a share, from $55.1 million, or 43 cents, a year earlier, New York-based Tiffany said. Analysts projected 61 cents, the average of estimates compiled by Bloomberg.

Profit in the year ending January 2012 will be as much as $3.80 a share, up from a previous forecast of a maximum of $3.75, Tiffany said. Analysts had projected $3.74, the average of 19 estimates.

Third-quarter sales advanced to $821.8 million, exceeding the $803.8 million average of 13 analysts’ estimates.

Cie. Financiere Richemont SA is the world’s largest luxury jewelry maker.

(Tiffany will hold a conference call at 8:30 a.m. New York time today to discuss results. To listen visit LIVE {<GO>})

--Editors: James Callan, Kevin Orland

To contact the reporters on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net;

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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