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Tiffany Net Down, Beats Estimates

Tiffany reported fourth-quarter earnings fell 35.3 percent, but a 6 percent sales gain bolstered results on an earnings-per-share basis.

NEW YORK — Tiffany & Co. on Tuesday said although fourth-quarter net earnings declined 35.3 percent, a 6 percent sales gain bolstered results on an earnings-per-share basis, which easily surpassed Wall Street’s estimate.

Shares initially fell after the announcement, but the stock rose in the afternoon session, closing the day up 1 percent to $38.91.

The luxury jewelry retailer stirred speculation in January that it might be in play as an acquisition because the board ended a stockholder rights plan, or poison pill. Financial sources said talks of a sale have died down over the past month. Meanwhile, the retailer has continued its store-opening push.

Last week, Tiffany said it was opening two more stores in China, one in Beijing and another in Shanghai. It already has one store in each of those cities. Two additional stores are set to open in Japan, but five have closed in the country. Also in the pipeline are store openings in Vancouver and Vienna.

Over the past six months, store openings have been announced in Macau; China; Monterrey, Mexico; Tucson, Ariz.; Nashville; Indianapolis, and Atlantic City, N.J. Other initiatives include doubling the store base of Iridesse to around 14 and launching six jewelry collections designed by architect Frank Gehry in select U.S. and Japanese stores.

Michael Kowalski, chairman and chief executive officer, said so far in the first quarter the company has seen “stronger-than-expected comparable-store sales growth in most international markets, including double-digit growth in Japan.” As for the U.S., same-store sales have been “modestly below the prior year, reflecting a difficult year-over-year comparison.”

On Tuesday, the company posted earnings in the three months ended Jan. 31 of $140.3 million, or 97 cents a diluted share, significantly higher than analysts’ estimates for 84 cents. Comparatively, the company earned $217 million, or $1.48, in last year’s fourth quarter, which had benefited from a $194 million one-time gain from the sale of the company’s stake in Aber Diamond Corp.

Net revenues in the quarter rose 6 percent to $858.5 million. On a constant-exchange basis, net sales were up 9 percent, the company said, and worldwide same-store sales rose 6 percent. U.S. retail sales rose 8 percent to $449.3 million, and same-store sales rose 5 percent, helped by higher spending per transaction.

In the full year, Tiffany earned $254.7 million, or $1.75, down 16.3 percent from $304.3 million, or $2.05, a year ago. Annual revenues were up 8.6 percent at $2.4 billion.

“There continued to be greater strength in higher price point jewelry,” Mark Aaron, vice president of Tiffany investor relations, said on a subsequent conference call. “There was solid demand for diamond jewelry all year, ranging from rings to studs, pendants, bracelets and necklaces. Tiffany’s expanded color diamond assortment is also attracting customers.”

At its flagship here, however, Tiffany said same-store sales declined 2 percent in the quarter. “The flagship’s performance was affected by lower foreign tourist spending in the fourth quarter, which more than offset higher sales to local resident customers,” Aaron said.

International retail sales rose 1 percent to $304 million, while same-store sales were up 7 percent. On a constant exchange basis, retail sales internationally were up 10 percent in the quarter, helped by an 8 percent increase in retail sales in Japan, where sales have lagged in recent quarters. Aaron said the company focused on sales training initiatives in Japan “to enhance customer relationships.” The company opened two new stores in Japan during the quarter but closed five there.

Looking to the new fiscal year, Tiffany reiterated a prior forecast for EPS of $1.77 to $1.82, while net sales are seen increasing 10 percent. Analysts are expecting EPS of $1.81 in the year on sales of $2.61 billion.