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Tiffany Cuts Outlook, Shares Tumble 11.2%

Shares of Tiffany & Co. are expected to remain under pressure as the company faces a more challenging retail environment...

Shares of Tiffany & Co. are expected to remain under pressure as the company faces a more challenging retail environment, said one analyst following the specialty retailer’s lowered earnings guidance Friday.

After trimming its earnings outlook on declining U.S. sales, shares of Tiffany & Co. slumped 11.2 percent to close Friday at $35.08.

In a statement the day after retailers posted weak same-store sales for December, Tiffany said comps for the holiday season declined 2 percent in the U.S.

“Tiffany’s holiday sales results were mixed, but we still expect to achieve strong earnings growth in the fourth quarter ending Jan. 31,” said Michael Kowalski, chairman and chief executive officer, in a statement.

Goldman Sachs retail analyst Adrianne Shapira wrote in a research note that Tiffany’s shares have “come under pressure as results show that even Tiffany is not immune to the current macro slowdown,” and that she expects those shares to remain pressured “until a new and achievable bar has been set.” She added that U.S. comps declined quickly and sharply from November’s healthy 7 percent gain as store traffic softened, with January experiencing the same negative trends.

The specialty jewelry store said worldwide sales from Nov. 1 to Dec. 31 rose 8 percent over the prior year to $867.3 million. On a constant exchange rate basis, worldwide sales rose 6 percent as comps gained 1 percent.

On the U.S. front, retail sales increased 4 percent to $449.1 million. However, increased spending per transaction was offset by a decline in the number of transactions. International retail sales jumped 18 percent to $334.8 million. On a constant exchange rate basis, sales gained 12 percent while comps rose 5 percent. Direct marketing sales of $70 million was essentially flat over last year, and other sales fell by 20 percent to $13.5 million due to a reduction in wholesale sales of diamonds by $2.9 million.

Tiffany said it expects fiscal year 2007 earnings per diluted share to be between $2.25 and $2.28, compared with its previous forecast of between $2.25 and $2.30.

Kowalski said that, despite soft U.S. sales, the company is still projecting strong fourth-quarter earnings growth, excluding onetime charges, that it expected prior to the holiday season due to “substantially better gross margins and expense savings.”

The ceo added that the company has “aggressive plans for 2008,” which include adding stores in the U.S. and overseas that would expand its store base by 12 to 15 percent, and introducing a “wide range of new products.”

The company will provide updated guidance when it posts fourth-quarter and full-year results on March 24.