Shares of Tiffany & Co. moved higher Wednesday after the luxury jewelry retailer posted second-quarter profits that beat Wall Street’s expectations by 11 cents and raised full-year guidance by 5 cents a share.
For the three months ended July 31, net income gained 16.2 percent to $124.1 million, or 96 cents a diluted share, from $106.8 million, or 83 cents, a year ago. Wall Street was expecting 85 cents a share.
Net sales increased 7.2 percent to $992.9 million from $925.9 million. Sales in the Americas rose 9 percent to $484 million, and in Asia-Pacific, grew 14 percent to $237 million. Sales in Europe rose 8 percent to $120 million.
The company said there was growth in the Americas, fine and solitaire jewelry categories, with fashion jewelry unit sales benefiting from strength in gold jewelry. Silver jewelry saw softness, particularly in entry-level sales under $500. Comparable-store sales at its New York flagship rose 8 percent in the quarter. In Asia-Pacific, sales growth was primarily in China and Australia. Sales in Japan slowed from the first quarter as expected as consumers bought in advance of the April consumption tax increase.
The company said gross margin rose to 59.9 percent from 57.5 percent, while operating margin increased to 21 percent.
For the six months, net income grew 31.2 percent to $249.7 million on a net sales gain of 10.1 percent to $2.01 billion.
Michael J. Kowalski, chairman and chief executive officer, said, “These healthy second-quarter results reflected solid sales growth in our stores, particularly in the Americas and Asia-Pacific regions. In addition, an improved gross margin was an important contributor to the earnings growth.”
The company said last month that Kowalski will retire on March 31. Frederic Cumenal, president, will assume the ceo post April 1.
The company raised its full-year diluted earnings per share guidance for the period ending Jan. 31, 2015, for the second time to between $4.20 and $4.30 from its prior forecast of $4.15 to $4.25 following first-quarter results. The luxury retailer began 2014 projecting diluted EPS in the range of $4.05 to $4.15.
Shares of Tiffany ended Wednesday’s trading session up 1 percent to $101.75.
Citigroup’s Oliver Chen said, “We are most impressed with America’s [8 percent comps gain], upside to gross margins, and our view of more product innovation ahead,” while Ike Boruchow at Sterne Agee said, “Tiffany continues to beat expectations through a combination of meaningful [gross margin expansion] and U.S. turnaround efforts.” Both have a “Buy” rating on the stock.
Paul Lejuez of Wells Fargo said, “We continue to like the Tiffany story, but market expectations are high (it trades above its luxury peers) and we remain sidelined by the valuation.” He has a “Market Perform” rating on the stock, the equivalent of a “Hold” rating.
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