NEW YORK — Improved costs and strong sales in China helped Tiffany & Co. earn a 16.3 percent rise in second-quarter income Tuesday.
This story first appeared in the August 28, 2013 issue of WWD. Subscribe Today.
The New York-based jeweler’s shares fell 1 percent to $80.82, even though the company raised its full-year outlook.
For the period ended July 31, net income totaled $106.8 million, or 83 cents a diluted share, compared with year-ago income of $91.8 million, or 72 cents a share.
Quarterly sales expanded 4.4 percent to $925.9 million from $886.6 million in the prior-year period.
Wall Street expected earnings per share of 74 cents on sales of $941.4 million.
Tiffany attributed the strong financial results to robust growth in Asia, specifically in Greater China, as well as growing demand for statement and fine jewelry.
Statement jewelry, which retails for more than $50,000, continued to outpace fashion jewelry in terms of sales, even though Tiffany said it has worked to improve its lower priced collections, which includes nongemstone baubles in silver, gold and Rubedo, its recently developed copper-centric alloy.
On a call with analysts Tuesday, Tiffany vice president of investor relations Mark Aaron noted the brand is focusing on new fashion jewelry collections, such as the Ziegfeld collection in silver and freshwater pearls and onyx, as well as the brand’s “reinterpretation” of its Atlas line, which will make its debut Sept. 10.
Those collections, “along with others in the product development pipeline, are intended to generate improving fashion jewelry sales trends over the next year,” Aaron said.
On the operational side, Tiffany chairman and chief executive officer Michael Kowalski credited diminishing product cost pressures to stronger quarterly results.
Indeed, quarterly gross margins improved to 57.5 percent of sales compared with year-ago margin of 56.3 percent.
“We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin,” the ceo said. “Looking forward, we are equally excited about the initiatives we are pursuing in product development, marketing communications and store expansion, all intended to further enhance Tiffany’s strong brand position and take fuller advantage of its long-term growth opportunities in the global luxury market.”
By region, sales in the Americas increased 2 percent to $444 million, as comparable-store sales remained unchanged. In the Asia-Pacific region, sales jumped 20 percent to $208 million, as comps expanded 13 percent, propped up by strength in China.
Impacted by the weaker translation of the Japanese yen, sales in Japan declined 14 percent to $136 million. But the jeweler said that on a constant-exchange-rate basis, sales rose 7 percent, as comps increased 8 percent, due partially to growth in the engagement and higher-end jewelry categories.
In Europe, business improved, thanks to strength in the U.K., giving Tiffany an 11 percent sales jump to $111 million. Comps in Europe rose 7 percent. Other sales grew 33 percent to $26 million, reflecting the conversion of five Tiffany stores in the United Arab Emirates from independently-operated to company-operated, the brand said.
For the year, Tiffany now anticipates EPS of between $3.50 and $3.60, up from its prior guidance of between $3.43 and $3.53.
Analysts are looking for earnings of $3.53 a share.