From upscale jeweler Tiffany & Co. Inc. to mainstream department store Dillard’s Inc., the drumbeat of the economic slowdown continued to echo through retailing last week.
This story first appeared in the December 1, 2008 issue of WWD. Subscribe Today.
Tiffany, confronted with a drop in third-quarter earnings, lowered full-year earnings estimates to a range of $2.30 to $2.50 a diluted share, from $2.82 to $2.92. The company said it would reduce overseas store openings by half next year to eight, most of them in the Asia-Pacific region.
The jeweler plans to open five stores in North America — three in the U.S. — versus six this year. Without elaborating, the New York-based firm said it plans to reduce staff.
Little Rock, Ark.-based Dillard’s, which saw its third-quarter loss quintuple, said it would cut capital expenditures more than one-third, to $120 million in 2009 compared with $192 million this year, as a result of “dramatically reduced store opening activity.”
The retailer opened 10 stores this year. While construction will begin on three stores next year, only one will open before the end of 2009. Dillard’s previously closed 21 underperforming units and revealed plans to reduce salaried staff by 8 percent.
In the three months ended Oct. 31, Tiffany posted a 56.9 percent drop in net income to $43.8 million, or 35 cents a diluted share, 10 cents above the consensus estimate, from $101.5 million, or 74 cents, last year. The year-ago number included a one-time gain of 48 cents a share on the sale-leaseback of its Tokyo flagship. Excluding that item and a 4-cent-a-share charge for a contribution to the Tiffany & Co. Foundation, the company said profit increased 13 percent in the latest period.
Net sales slid 1.4 percent to $618.2 million, from $627.3 million. Excluding the effects of currency fluctuation, net sales slid 2 percent and comparable-store sales fell 7 percent worldwide.
Tiffany has benefited from the influx of foreign tourists into the U.S., but the strengthening of the dollar and increasingly global nature of the economic crisis have slowed that trend.
Comparable-store sales in the U.S. declined 14 percent in the quarter, below expectations of “only a modest decline,” the company said. The Fifth Avenue flagship, which generated more than 20 percent of U.S. sales for the quarter, posted a 5 percent dip in comps. October was a particularly harsh month for the flagship as sales declined 17 percent.
Internationally, Tiffany’s sales softened as well, with Asia-Pacific falling 3 percent in constant currencies. Japan was down 7 percent and the rest of Asia-Pacific up 4 percent.
Europe’s comps rose 8 percent, down from a 10 percent rise in 2007. London posted double-digit sales growth.
Dillard’s posted a quarterly loss of $56 million, or 76 cents a diluted share, compared with a loss of $11.3 million, or 15 cents a share, a year ago. Stripping out one-time charges of 8 cents a share related to store closings and 4 cents a share for hurricane-related expenses, the loss per share was 64 cents. On average, analysts polled by Yahoo Finance estimated a loss of 57 cents a share.
Sales in the three months fell 7.7 percent to $1.51 billion from $1.63 billion last year and were down 9 percent on a same-store basis .
“The oppressive economic environment clearly weighed heavily on our results during the third quarter,” said chief executive officer William Dillard 2nd. “We continue to take aggressive action to navigate these challenging times.”
Maintaining his “hold” rating on Dillard’s stock, Standard & Poor’s equity research analyst Jason Asaeda wrote, “We continue to project narrower losses next year on more effective inventory and expense management.” However, he expects the retailer to incur higher markdowns in the fourth quarter in order to finish the year with cleaner inventories.