Tiffany 2Q profit misses estimates as currency weighs on sales

TIFFANY & Co. missed analysts' profit expectations, as currency fluctuations tamped down global revenue, according to the luxury jewelry retailer and manufacturer. / BLOOMBERG FILE PHOTO/KONRAD FIEDLER
TIFFANY & Co. missed analysts' profit expectations, as currency fluctuations tamped down global revenue, according to the luxury jewelry retailer and manufacturer. / BLOOMBERG FILE PHOTO/KONRAD FIEDLER

NEW YORK – Tiffany & Co., the luxury jewelry chain, posted second-quarter profit that missed analysts’ estimates after currency fluctuations took a bite out of international revenue.

Net sales totaled $990.5 million for the three months ended July 31, one-quarter of a percent less than in the same 2014 period, as net income fell 15.5 percent to $104.9 million, the New York-based company said in its Thursday earnings release. Earnings per diluted share fell to 81 cents from 96 cents a year earlier.

Excluding an impairment charge in the quarter related to a financing arrangement with Koidu Limited, profit was 86 cents per diluted share. Analysts had estimated 91 cents on average, according to data compiled by Bloomberg.

A strong U.S. dollar has lowered the value of Tiffany’s sales overseas, where the company gets most of its revenue. Currency fluctuations also have kept tourists from making purchases at U.S. stores, dealing a second blow to revenue.

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“The adverse effects from the strong dollar have been even more significant than initially expected,” CEO Frederic Cumenal said in the statement. The company is looking to new designs and products, such as the Tiffany T jewelry and CT60 watch collections, to help fuel demand, he said.

The shares fell 2.1 percent to $83.29 at the close in New York. The stock has slumped 22 percent this year.

“It was a surprise,” said Laurent Vasilescu, an analyst at Macquarie Capital. “There’s nothing structurally wrong with the company – it’s that the tourism and the currencies have been a huge headwind.”

Signet results

Tiffany’s results contrasted with those of Signet Jewelers Ltd., a lower-end retailer that owns the Kay and Jared chains. It posted second-quarter earnings of $1.28 a share, topping analysts’ estimates for $1.15. The company said third-quarter profit will be as much as 40 cents, compared with projections of 37 cents.

Signet shares jumped 14 percent to $138.82, the biggest gain in more than a year.

Holding currency rates constant, Tiffany’s same-store sales rose 7 percent last quarter from the same time a year earlier. Analysts had been projecting a 3.5 percent gain, according to Consensus Metrix.

Tiffany expects its fiscal 2016 earnings to be 2 percent to 5 percent below last year’s total of $4.20 a share. Analysts estimated $4.23 on average.

The retailer also is adapting to a change in leadership. Cumenal took the CEO job on April 1, with the company’s former leader, Michael Kowalski, remaining on the board as nonexecutive chairman.

“The jewelry business has gotten tough: There are a lot of competitors, and Tiffany is struggling at the lower end,” said Brian Yarbrough, an analyst at Edward Jones. “I’ve been questioning all year whether they can make their guidance, and I still question it today. All that hinges on the fourth quarter, and we all know how volatile that is.”

Tiffany has a significant manufacturing facility in Cumberland.

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