NEW YORK — Tiffany & Co. reported a higher-than-anticipated 8.8 percent rise in first-quarter net profits spurred by strong sales in the U.S., which helped offset continued weakness in Japan.
In the three months ended April 30, the luxury retailer earned $40.1 million, or 27 cents a diluted share, versus $36.8 million, or 25 cents, in the year-earlier quarter. Wall Street analysts had been expecting a profit of 24 cents in the latest quarter.
Net sales rose 11.6 percent to $509.9 million, from $457 million a year ago. On a constant-exchange rate basis, which excludes effects from the weak U.S. dollar, Tiffany said total revenues increased 11 percent and worldwide same-store sales were up 4 percent.
Retail sales in the U.S. rose 14 percent to $243.4 million, while same-store sales gained 11 percent, Tiffany said, citing an increase in average transaction size and a larger number of transactions. Sales of engagement rings and fine jewelry helped drive U.S. results.
Total international sales were up 3 percent at $190.3 million. On a constant exchange basis, the increase totaled 1 percent, while same-store sales decreased 6 percent on that same basis. In Japan, comps fell 10 percent at the constant-exchange rate.
Mark Aaron, vice president of investor relations, said on a subsequent conference call that sales in Japan fell 5 percent in yen and noted that results during the quarter were "lackluster…even in the higher price point categories."
Nevertheless, Tiffany is committed to its presence in Japan and plans to "selectively" open two more stores this year. "While Japan sales have been under pressure for three years, it remains a very profitable market for us," Aaron said. The management team in Japan is working to address product development and marketing issues as well as "enhancing the shopping and service experience in our stores and boutiques," he said. "While results certainly indicate no visible signs yet of a turnaround, we still believe we are on the right track for improvement later this year."
Michael Kowalski, chairman and chief executive officer of New York-based Tiffany, said in a statement that the company maintains its prior EPS guidance for $1.45 to $1.55 in the full year. He added, however, that earnings could come in toward the low end of that forecast "if full-year comparable-store sales in Japan were to decline by a single-digit percentage." Analysts' consensus is for $1.51 a share in the year.
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