A 75.6 percent drop in fourth-quarter earnings and tepid sales outlook notwithstanding, Tiffany & Co. intends to stay on the sidelines of the current promotional furor running through the jewelry market.
“While we believe our sales were negatively affected by the rampant discounting of some other jewelers and high-end competitors, we did and will continue with our full-price philosophy in order to maintain appropriate margins and, very importantly, to maintain the integrity of the Tiffany & Co. brand,” said executive vice president and chief financial officer James Fernandez on the company earnings call Monday morning.
Pressured by the economic slowdown, Tiffany said it has focused and continues to focus on reducing costs and launching products to navigate the turbulent economic waters.
Cost cuts directly impacted Tiffany’s bottom line during the fourth quarter, when about 600 of 800 eligible employees in the U.S. accepted an early retirement package and the company opted to shutter its 16-store Iridesse pearl jewelry chain. The moves will reduce worldwide staff by about 10 percent and lead to pretax savings of about $60 million this year, but they also generated charges that subtracted 60 cents a share from earnings.
As a result, net income for the period ended Jan. 31 was $31.1 million, or 25 cents a diluted share, versus $127.4 million, or 96 cents a share, a year earlier. Excluding charges, earnings totaled 85 cents, 5 cents higher than the analyst consensus estimate listed by Yahoo Finance.
The better-than-expected result helped to catapult Tiffany’s share $3.14, or 15.5 percent, to $23.37 as the major indices shot up on word of the new Treasury Department plan for buying up toxic assets. (For more on the stock market, see page 14.)
Sales tumbled 20.1 percent to $841.2 million from $1.05 billion, in the year-ago quarter.
“Right now, the overall retail jewelry industry is under enormous stress. The industry is competitively fragmented,” said chairman and chief executive officer Michael Kowalski on Monday’s call. “We faced an unprecedented environment with profound challenges, but also with promising opportunities for Tiffany.”
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