Flagging sales in the U.S. and Europe, due in part to increasing expenses and a pullback in spending during holiday, gave Tiffany & Co. its first decline in quarterly net income since the third quarter of 2009.
Despite reporting a 1.6 percent dip in fourth-quarter income Tuesday, Tiffany remained bullish, forecasting stronger-than-expected profits and sales in 2012, as it fetes its 175th anniversary next year and continues its global expansion push. Even though Tiffany’s uncharacteristically modest results contrast with the broader strength in the luxury market, Wall Street was not dissuaded, as the jeweler’s stock jumped 6.7 percent to $73.27 at the end of trading. This could be attributed to the fact that the slip in net income was largely expected.
In January, the New York-based retailer lowered its annual guidance to between $3.60 and $3.65 a share, not including a 20-cent expense, citing “markedly weaker” holiday sales in the U.S. and Europe.
“We generated strong sales and earnings growth for the year despite the softness in the fourth quarter and we continue to build an even stronger platform for future growth,” chairman and chief executive officer Michael Kowalski said on the earnings call Tuesday. “Our plan for 2012 is to open a net of 24 stores representing a 10 percent increase in the number of locations.”
The brand said it would open nine stores in the Americas, seven in the Asia-Pacific region, three in Europe and five in the United Arab Emirates. While expansion will help extend the brand’s reach, the jeweler will still have to contend with economic volatility.
Mark Aaron, Tiffany vice president of investor relations, told WWD that while the company experienced a hiccup in spending among high-end consumers in key regions of the U.S. and Europe in the quarter, it’s “not a long-term phenomenon,” as business has since met internal expectations. Aaron declined to disclose those financials.
“We believe that the slower sales growth in the Americas in the fourth quarter might have been in varying degrees due to restrained spending by customers employed in the financial sector, which especially affected our sales in the Northeast and mid-Atlantic regions of the U.S., substantial competitive discounting and particular softness at our entry-level silver jewelry price point that might be tied to some resistance to price increases, among other factors,” Aaron said. “We think that softness in London has probably reflected restrained spending by customers in the financial industry similar to what we’ve experienced in New York along with overall challenging economic conditions.”
This translated to a 1.6 percent dip in profits to $178.4 million, or $1.39 a diluted share for the quarter ended Jan. 31, compared with year-ago income of $181.2 million, or $1.41 a share. Wall Street expected earnings per share of $1.42.
Quarterly revenues, however, met expectations, and totaled $1.19 billion versus sales of $1.10 billion a year earlier. The brand said that while sales of engagement jewelry continued to increase, high-end statement jewelry sales “softened after experiencing strong growth in the first three quarters of 2011.” Sales of fine and fashion jewelry expanded “modestly” over the three quarters.
On a constant-exchange-rate basis, total comparable-store sales rose 5 percent for the quarter versus a 13 percent comp increase the prior year. With the exception of Japan, which matched its year-ago 4 percent comp rise, every region posted weaker same-store sales numbers. In Asia-Pacific, comps jumped 13 percent versus 27 percent the prior year, while in Europe, comps fell 2 percent versus a 6 percent rise.
Comps in the Americas edged up 3 percent, but failed to outpace last year’s 13 percent increase. Nonetheless, strong tourist dollars expanded comp sales at the New York flagship 20 percent, Tiffany said.
Selling, general and administrative costs grew 9.8 percent to $431.2 million.
For the year, the jeweler’s net income rose 19.2 percent to $439.2 million, or $3.40 a diluted share, and its sales expanded 18.1 percent to $3.64 billion.
In 2012, the retailer anticipates a profit of between $3.95 and $4.05 a diluted share, higher than analysts’ estimates of $3.64 a share. Tiffany will report first-quarter results on May 24.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty