NEW YORK — Tiffany & Co. cut its profit guidance for the second quarter in a row Monday, but the company expects growth to pick up again by the end of the year.
That silver lining sent shares of the upscale jeweler up 7.2 percent to $62.71, even though the retailer missed Wall Street’s second-quarter earnings per share projections by a penny.
The New York-based brand began 2012 with a bullish outlook, based in part on an expected boost from events surrounding its 175th anniversary this year. But the jeweler was caught off guard by a slowdown in the Americas, which called into question whether the results were linked to a deceleration of the high-flying luxury market or if the troubles were brand specific.
As a result, Tiffany lowered its yearly guidance Monday to between $3.55 and $3.70 a diluted share, from $3.70 to $3.80 a diluted share. Wall Street was already expecting annual EPS of $3.64.
“We think it is only prudent to maintain a cautious near-term outlook about global economic conditions and the effects on customer spending, with year-over-year growth comparisons in the next few months also being pressured by the strong increases we experienced last year,” said chairman and chief executive officer Michael Kowalski. “At the same time, we are determined to further strengthen Tiffany’s competitive position by expanding our store and customer base and introducing enticing new designs, all intended to generate solid long-term financial performance.”
Even though the jeweler’s third-quarter earnings are expected to “decline,” the ceo offered that a “resumption of growth” would follow in the fourth quarter.
An easing in sky-high diamond, platinum, gold and silver prices is expected to ultimately help Tiffany’s bottom line, said chief financial officer and senior vice president Patrick McGuiness.
“An expected year-over-year gross margin decline in the third quarter should be smaller than we experienced in the second quarter, and we expect gross margin to increase in the fourth quarter although any product mix changes could offset some of it,” the cfo said. Gross margins fell to 56.3 percent in the second quarter, down from 59 percent a year earlier.
Tiffany isn’t out of the woods yet, with a still-volatile U.S. economy, a slowing in the breakneck growth in the Asia-Pacific region and a pullback in spending in Europe.
For the second quarter ended July 31, Tiffany posted a 2 percent gain in net income to $91.8 million, or 72 cents a diluted share, from year-ago income of $90 million, or 69 cents a share. Stripping out nonrecurring costs, earnings declined 17 percent for the period, Tiffany said, adding that the third-quarter will likely follow a similar trajectory.
Net sales increased 1.6 percent to $886.6 million, from year-ago sales of $872.7 million. Analysts were looking for EPS of 73 cents on sales of $890.9 million.
Excluding the impact of currency fluctuations, comparable-store sales in the Americas declined 5 percent, pulled down by a 9 percent comp decline at Tiffany’s Fifth Avenue flagship here. A year earlier, comps at the flagship, which brings in nearly 10 percent of total sales, rose 41 percent.
Comps dipped 5 percent in Asia-Pacific region, but rose 10 percent in Japan. In Europe, comp sales edged up 2 percent, thanks in part to an increase in spending by Asian tourists.
“[Tiffany’s] geographically diversified multiplatform business model, with international sales representing more than half of the total business, positions the company well to navigate through some uncertainty in the current economic environment, particularly as we look for continued opportunities for growth in international regions,” noted Barclays Capital retail analyst Robert Drbul. “Given the consolidation throughout the jewelry industry, we believe Tiffany is poised to take market share as conditions improve.”
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