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Tiffany Q2 Revenues Fall Short of Expectations

Shares of Tiffany & Co. fell more than 3 percent Friday.

Shares of Tiffany & Co. fell more than 3 percent Friday after the upscale jeweler reported second-quarter earnings that met analysts’ expectations but revenues that fell considerably short of them.

This story first appeared in the August 30, 2010 issue of WWD.  Subscribe Today.

Net income for the three months ended July 31 rose 19.2 percent to $67.7 million, or 53 cents a diluted share, from $56.8 million, or 46 cents, in the year-ago quarter. Sales climbed 9.2 percent to $668.8 million from $612.5 million.

While earnings per share — brought down 2 cents by a charge to cover the upcoming relocation of the firm’s New York-headquarters staff — matched consensus estimates, revenues came up shy of the $690.2 million Wall Street had anticipated. Despite an upward revision in EPS guidance by the company, the sales shortfall contributed to a $1.33, or 3.2 percent, decline in the company’s shares to $40.71 on a day when the Dow Jones Industrial Average retook the 10,000 level, rising 1.7 percent to 10,150.65, and the S&P Retail Index advanced 1.1 percent to 405.82.

Quarterly sales in the U.S., Canada and Latin America rose 8 percent to $350.4 million, while comparable-store sales in the U.S. gained 5 percent. Sales in the New York flagship rose 8 percent. However, Internet and catalogue sales in the Americas fell 2 percent, the company said. In the Asia-Pacific region, sales rose 21 percent to $111.5 million. The company said sales in Japan rose 4 percent to $118 million. In Europe, sales increased 14 percent to $76.9 million. “Other sales” declined 19 percent to $11.9 million, mostly because of the depressed market for rough diamonds.

Gross margin advanced to 57.8 percent of sales from 55.1 percent a year ago on a combination of manufacturing efficiencies, higher prices and a decline in the wholesale sales of rough diamonds.

Michael J. Kowalski, chairman and chief executive officer, emphasized the firm’s increasingly global profile. “Tiffany’s financial performance in the quarter continued to demonstrate the benefits derived from a growing global presence, with roughly half of our sales now occurring outside the U.S.,” he said.

He noted that, so far in the third quarter, worldwide sales were growing at a low-double-digit pace.

On tap for the second half, which the ceo said is being approached with a sense of “guarded optimism,” is a collection of jewelry with yellow diamonds, as well as other new products.

The company raised its EPS forecast for the year to between $2.60 and $2.65 a diluted share for continuing operations from previous guidance of $2.55 to $2.60. Analysts had previously penciled in $2.61.

For the six months, income jumped 62.9 percent to $132.1 million, or $1.03 a diluted share, from $81.1 million, or 68 cents, a year ago. Sales rose 15.2 percent to $1.3 billion from $1.13 billion.