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Tiffany Q3 Net Up Nearly 50%

Investors rewarded the New York-based jewelry retailer with a record-setting day on the New York Stock Exchange.

Tiffany & Co. glistened in the third quarter, posting increases in sales and earnings that easily beat Wall Street estimates.

This story first appeared in the November 27, 2013 issue of WWD.  Subscribe Today.

Measured in U.S. dollars, sales rose in all regions, although they fell in Japan when measured in local currency due to the steep drop in the yen. The company projected single-digit comparable-sales increases in all markets for the fourth quarter as it reported strong reactions across a wide spectrum of its products.

Investors rewarded the New York-based jewelry retailer with a record-setting day on the New York Stock Exchange. Shares finished Tuesday’s session at $88.02, up $7.03, or 8.7 percent, and set an all-time high of $88.88 in midday trading. Volume was more than five times average levels.

“We’re experiencing excellent customer response to our expanded fashion jewelry designs, highlighted by the Atlas collection, as well as continued growth in our fine and statement jewelry, with particular strength in our yellow diamond collection,” said Michael Kowalski, chairman and chief executive officer. Atlas has performed especially well in the gold segment of the collection.

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In the three months ended Oct. 31, net income rose 49.7 percent to $94.6 million, or 73 cents a diluted share, against analysts’ consensus estimates for earnings per share of 58 cents. Year-ago profit was $63.2 million, or 49 cents.

Kowalski noted that the increase in operating earnings — 31 percent, to $153.6 million — outpaced the rise in sales, “reflecting favorable product cost trends and ongoing well-controlled expenses.”

Revenues were up 6.9 percent to $911.5 million from $852.7 million. Wall Street had expected sales of $889.5 million. Gross margin landed at 57 percent of sales, up from 54.4 percent in the 2012 period.
Asia-Pacific led the charge as sales rose 27 percent, to $238 million, and were up 29 percent at constant currency. The Americas business, the company’s largest, was up 4 percent to $417 million and rose 5 percent at constant currency.

Europe pulled off a 7 percent increase in revenues, to $104 million, and picked up 4 percent at constant currency. On a reported basis, sales in Japan were off 13 percent to $128 million. Excluding the deterioration in the yen versus the dollar, sales were up 9 percent.

“Our sales in Hawaii and Guam typically come in great part from Japanese tourists,” Mark Aaron, vice president of investor relations, told WWD. “It’s fair to speculate that a lot of those customers are staying home and buying locally.”

On a conference call with analysts, he described the increase at the New York flagship as “solid,” bolstered by sales to Chinese and European tourists with “modest growth in domestic spending.” He pointed to softness on the East Coast offset by strength on the West Coast, with mixed results in other markets in the Americas such as Canada, Mexico and Brazil.

The company lifted its full-year EPS guidance to a range of $3.65 to $3.75 versus previous estimates of between $3.50 and $3.60 a share and its year-ago tally of $3.25. The revised guidance excludes expenses tied to earlier cost-cutting initiatives and stood against analysts’ estimates, on average, for full-year EPS of $3.62. The revision doesn’t imply any change in fourth-quarter profit expectations but incorporates the better-than-anticipated performance in the third quarter.

James Fernandez, executive vice president and chief operating officer, said on the company conference call that the projection includes expectations of single-digit increases in comparable sales in all regions with a “modest improvement in the operating margin” in the fourth quarter.

In the first nine months of the year, net income advanced 20.5 percent to $285 million, or $1.85 a diluted share, from $236.5 million, or $1.85. Sales were up 6.8 percent to $2.73 billion from $2.56 billion in the year-ago period.

Meanwhile, pulled down by weakness in its U.K. operations, Signet Jewelers Ltd. reported that net income fell 3.72 percent to $33.6 million, or 42 cents a diluted share, from $34.9 million, or 43 cents, in the year-ago period.

Sales picked up 7.7 percent to $771.4 million from $716.2 million while same-store sales advanced 3.2 percent. In the U.S., where Signet operates the Kay and Jared jewelry chains, sales were up 9.8 percent to $632.1 million and comparable-store sales rose 4.2 percent with strength in bridal, colored diamonds and watches. However, U.K. sales were off 0.9 percent, to $139.3 million, with comps off 0.9 percent.

Brean Capital analyst Eric Beder reiterated his “buy” rating for the stock and raised his price target to $88 a share from $85. “The company remains on a steady track to further market dominance via its strong brands, expanding e-commerce channel and aggressive marketing campaigns,” he wrote in a research note.
Shares Tuesday rose 1.8 percent to $77.81.

Also on Tuesday, Movado Group Inc.’s third-quarter profits fell by a third but managed to beat Wall Street’s expectations by 2 cents.

For the three months, net income was $23 million, or 89 cents, versus expectations of a profit of 87 cents a share and year-ago earnings of $34.5 million, or $1.34, a year ago. The 2012 EPS figure was lifted 67 cents by nonrecurring items, without which EPS would have been halved.

Sales expanded 18.4 percent to $189.7 million from $160.2 million.

Efraim Grinberg, chairman and ceo, said the company “remained focused on leveraging our infrastructure as we grow. Sales continue to be driven by our Movado and licensed brands, which include a positive customer response to our repositioned Coach watch brand and introduction of our Scuderia Ferrari watch brand.”

The company maintained its full-year guidance for EPS of $1.90 but lifted expectations for sales to the high end of its previous guidance of between $575 million and $580 million.

Shares fell 4.1 percent to $44.54 in trading Tuesday.