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Retail Shares Surge, Tiffany Shines

Retail shares soared on Monday, boosted in part by Tiffany & Co., whose fourth-quarter results brought some sparkle to the luxury sector.

Retail shares soared on Monday, boosted in part by Tiffany & Co., whose fourth-quarter results brought some sparkle to the luxury sector.

The overall stock market also rose after J.P. Morgan Chase & Co. upped its takeover bid for Bear Stearns, and new housing data signaled a possible improvement in the sector.

The Dow Jones Industrial Average gained 1.5 percent to 12,548.64 and the broader S&P 500 also grew 1.5 percent, to 1,349.88. The S&P Retail Index swelled 3.6 percent to close at 409.82.

There were some notable gainers, particularly in the specialty sector. AnnTaylor Stores Corp. increased 7.5 percent to $24.70; New York & Company Inc. shot up 10.3 percent to $6.31, and Coldwater Creek Inc. rose 20.9 percent to close at $5.73.

Also among the top performers were Sears Holdings Corp., up 7.4 percent to $111.59; J. Crew Group Inc., a gain of 5.5 percent to $46.07, and Lululemon Athletica Inc., a rise of 12.6 percent to $31.13.

Shares of Tiffany & Co. jumped 10.5 percent to close at $42.65.

While the jewelry retailer posted a 15.8 percent decline in fourth-quarter earnings, hurt by onetime charges, its adjusted earnings beat analysts’ expectations and, going forward, the company said it is poised for growth.

For the three months ended Jan. 31, earnings dropped to $118.3 million, or 89 cents a diluted share, from $140.5 million, or $1.07 in the year-ago period. Excluding onetime charges, profits reached $1.27 a diluted share, beating Wall Street’s expectations of $1.21 a share.

Sales grew 9.8 percent to $1.05 billion from $958.9 million. U.S. retail sales rose 4 percent to $527.9 million, and same-store sales declined 1 percent. International retail sales increased 21 percent to $422.6 million, while comps grew 6 percent.

Onetime items, on a per-diluted-share basis, included a charge of 22 cents from loans to Tahera Diamond Corp. for protection from creditors in January; a charge of 7 cents due to lower-than-expected store performance at the company’s Iridesse subsidiary, and a charge of 9 cents related to management’s decision to discontinue select watch models in anticipation of the start-up of its strategic alliance with The Swatch Group Ltd.

For the full-year period, earnings increased 19.6 percent to $303.8 million, or $2.40 a diluted share, from $253.9 million, or $1.91 last year. Sales increased 14.8 percent to $2.94 billion from $2.56 billion.

“In 2008 we expect to see robust growth in our non-U.S. markets other than Japan and are experiencing such performance in the quarter to date,” said Michael Kowalski, chairman and chief executive officer. “We remain cautious about the U.S., although comparable-store sales are currently increasing slightly.”

Tiffany expects a slight decline in domestic comps in the first half of the year and forecast full-year earnings in the range of $2.75 to $2.85 a diluted share. The company previously predicted fiscal 2009 earnings in the range of $2.50 to $2.55 a diluted share.

Also, during the first quarter, the company will discontinue valuing its inventories using the last-in-first-out inventory accounting method, which hurt profits, and will adopt the average cost method.

Mark Aaron, vice president for investor relations, said in an interview, “U.S. expectations continue to remain soft during the first half of the year, but we expect it to pick up in the second half. Foreign tourism has been increasing and is benefiting our U.S. operations, especially our New York flagship. A lot of Europeans are coming over with strong currency and shopping.”

Aaron said the jewelry chain also sees “strong growth” in the rest of Asia and Europe, and in particular Hong Kong, Taiwan and Australia.

Tiffany has 17 stores in Europe, and it is entering the Madrid and Belgium markets.

“Our international business will be the driver of growth in 2008, except for Japan,” Aaron said. “Our Japanese business has been soft for several years. It has been a tough environment over there. But we are making strides on improving how our business operates there by closing underperforming stores. But we are not banking on that market to improve any time soon.”