Tiffany profit tops estimates as cost cuts blunt sales drop

EVEN AS SALES FELL ACROSS THE GLOBE, Tiffany eked out a profit increase in its fiscal 2017 second quarter, the jewelry manufacturer said Thursday. / BLOOMBERG FILE PHOTO/KONRAD FIEDLER
EVEN AS SALES FELL ACROSS THE GLOBE, Tiffany eked out a profit increase in its fiscal 2017 second quarter, the jewelry manufacturer said Thursday. / BLOOMBERG FILE PHOTO/KONRAD FIEDLER

NEW YORK – Tiffany & Co., the luxury jewelry retailer, posted second-quarter profit that topped analysts’ estimates as a clampdown on costs helps it weather sluggish demand from its affluent customers.

Net income for the three months ended July 31 totaled $105.7 million, an increase of 0.8 percent, as earnings per diluted share were 84 cents, the New York-based company said in a statement Thursday. Analysts projected EPS of 71 cents, on average.

Sales last quarter trailed expectations, falling 5.9 percent to $931.6 million compared with the same year-ago quarter, missing analysts’ $933.9 million estimate. Comparable-store sales fell 9 percent, excluding the effects of currency fluctuations. Analysts projected a 7.1 percent drop, according to the average of estimates compiled by Consensus Metrix.

The results show Tiffany has been successful in keeping a lid on expenses, allowing it to remain profitable in the face of global economic turbulence that has hampered sentiment among high-end consumers. The company also signaled confidence in its strategy by reaffirming annual forecasts for earnings and sales, defying some analysts’ expectations that Tiffany would cut projections.

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“The global environment continues to reflect well-known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists,” CEO Frederic Cumenal said in the statement. “We are managing expenses efficiently.”

Cumenal said the company will maintain its marketing spending as a percentage of sales and continue initiatives to strengthen its position among luxury brands.

Forecasts maintained

The company repeated its forecasts that full-year earnings per share will fall by a mid-single-digit percentage from 2015 and net sales will slip by a low-single-digit percentage, defying some analysts’ expectations that Tiffany would cut projections more.

The shares rose as much as 7.4 percent to $74 in New York, the biggest intraday gain since May 2015. Tiffany had dropped 9.7 percent this year through Wednesday.

The same-store sales disappointments were centered in the Americas and Japan.
In the Americas, they dropped 9 percent. Analysts estimated a 7.8 percent decline. In Asia-Pacific, they slipped 9 percent. Analysts estimated a 11.4 percent drop. In Europe, they fell 13 percent. Analysts estimated a 13.6 percent decline. In Japan, they were down 3 percent. Analysts estimated a 1.8 percent gain.

“Most people thought it was going to be worse than it was,” said Brian Yarbrough, an analyst at Edward Jones & Co. “But at some point they would have to start driving sales to take the stock higher. The retail environment is extremely difficult.”

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