Tiffany & Co. offered the world of luxury a bit of hope last week.

This story first appeared in the November 30, 2009 issue of WWD. Subscribe Today.

After two years of U.S. comparable-store sales declines, the New York-based jeweler is forecasting a comp rise for the current quarter, which includes the key holiday season.

Sales should still be down from 2007 levels after a 33 percent drop in the fourth quarter last year, but a return to growth would mark a significant milestone for the luxury jeweler. Tiffany’s U.S. comp-store sales turned negative in the fourth quarter of 2007 as the U.S. economy began to contract.

“Based on what we saw in the third quarter and what we’re seeing in November to date, we felt we can now plan for a moderate increase for comp-store sales in the U.S. for the fourth quarter,” said Mark Aaron, vice president of investor relations. “We’re not going out on a limb, but just assuming that…the tone of business in the U.S. is improving to some degree.”

U.S. comparable-store sales fell 10 percent in the third quarter and are down 25 percent year to date.

“It seems like there’s signs of life,” said Paul Lejuez, an analyst at Credit Suisse. “As they face easier comparisons, the results are actually getting better, which is good news for the fourth quarter.”

Lejuez said the company still has room to grow. “As long as they keep it to these very small stores, it’s probably not a bad thing to expand here in the U.S.,” he said. “I prefer them to focus internationally, though.”

The company is looking at several avenues of growth and has built a cash stockpile of almost $375 million that could help it expand down the line.

“We remain confident in the long-term growth potential of Tiffany, driven by new store, market and product opportunities; the ability to realize market share gains in a changed competitive environment, and the growing appeal of our core brand values of genuine luxury and lasting value,” said Michael Kowalski, chairman and chief executive officer.

Profits for the third quarter fell to $43.3 million from $43.8 million while earnings per diluted share tallied 35 cents for both periods. Earnings from continuing operations totaled 34 cents a share and bested the 24 cents Wall Street anticipated.

Sales for the three months ended Oct. 31 slid 2.9 percent to $598.2 million from $616.2 million. Sales in the Americas fell 9 percent to $303.5 million, as turnover in the Asia-Pacific region rose 10 percent to $225.8 million and Europe increased 12 percent to $65 million.

Cuts to marketing spending and staffing costs helped reduce selling, general and administrative expenses by $4.6 million.

For the year, Tiffany raised its profit guidance for continuing operations to $1.88 to $1.98 a diluted share, up from the $1.65 to $1.75 previously forecast.

For the year to date, earnings fell 34.1 percent to $124.5 million, or $1 a diluted share, from $188.9 million, or $1.49. Sales declined 14.1 percent to $1.73 billion from $2.01 billion.

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