Tiffany profit tops estimates after jewelry price increases

DESPITE A DECLINE IN SECOND-QUARTER REVENUE, Tiffany & Co. saw double-digit profit growth, as raw material cost declines and retail price increases helped the world's second-largest luxury jewelry retailer beat expectations. / BLOOMBERG FILE PHOTO/KONRAD FIEDLER
DESPITE A DECLINE IN SECOND-QUARTER REVENUE, Tiffany & Co. saw double-digit profit growth, as raw material cost declines and retail price increases helped the world's second-largest luxury jewelry retailer beat expectations. / BLOOMBERG FILE PHOTO/KONRAD FIEDLER

NEW YORK – Tiffany & Co., the world’s second-largest luxury jewelry retailer, reported second-quarter profit that topped analysts’ estimates as price increases and declining product costs helped counter tepid sales in the Americas.
Net income in the quarter ended July 31 rose 16 percent to $106.8 million, or 83 cents a share, from $91.8 million, or 72 cents, a year earlier, the New York-based company said today in a statement. Analysts projected 74 cents, the average of 22 estimates compiled by Bloomberg.
Tiffany, which has seen a drop in costs of the precious materials it uses to make its jewelry, raised prices this year after holding them steady last year. Sales fell short of estimates amid a disappointing second quarter across the U.S. retail industry.
“It’s lower silver costs they are benefiting from,” Brian Yarbrough, an analyst with Edward Jones & Co. in St. Louis, said in a telephone interview Tuesday. “When they increased prices in the past they didn’t see push-back, and I think that continues: They don’t see the push-back.”
Gross margin, or earnings left after subtracting the cost of goods, came to 57.5 percent of sales compared with 56.3 percent a year earlier.

Company shares rose 1.3 percent to $82.74 at 9:59 a.m., Eastern time. The stock had gained 42 percent this year through Monday, compared with a 16 percent increase for the Standard & Poor’s 500 Index.

Sales miss

Tiffany joined retailers from No.1 discounter Wal-Mart Stores Inc. to luxury chains like Nordstrom Inc. in posting sales that missed estimates. Consumers have switched their spending from personal discretionary goods to cars and home-related merchandise.
Revenue advanced 4.4 percent to $925.9 million at Tiffany. Analysts projected $942.4 million.
Sales at stores open longer than 12 months in the Americas were unchanged, after a 3 percent increase in the first quarter.
“That is pretty weak, that deceleration from the first quarter,” said Yarbrough, who recommends holding the shares. “That is concerning.”
Tiffany saw declines in unit sales in the Americas, particularly in moderately priced fashion jewelry, Mark Aaron, a company spokesman, said on a conference call with analysts. Sales also dropped at branch stores in the region, he said.
The company raised its annual profit forecast to a range of $3.50 to $3.60 a share, excluding some items, from $3.43 to $3.53. Analysts estimated $3.53, on average.
Cie. Financiere Richemont SA is the world’s largest luxury jewelry maker.

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