Tiffany’s profit falls
NEW YORK, USA – TIFFANY & Co said yesterday that its fourth-quarter profit slipped, as wealthy customers continued to buy up its priciest items but demand for its more modest jewellry fell.
The lower-than-expected earnings broke a five-quarter streak of better-than-expected results for the upscale jeweller. But the company was optimistic about its prospects for 2012, predicting both higher profits and revenue.
The news sent shares of the company known for its iconic turquoise box soaring US$5.09 ($440), or 7.4 per cent, to US$71.77.
The quarterly results didn’t come as a complete surprise. After posting solid results for the first three quarters of the year, Tiffany cut its 2011 profit prediction in January, saying that its US and European sales weakened significantly during the holiday season as customers pulled back on high-end jewellry spending.
For the quarter ended January 31, Tiffany reported net income of US$178.4 million, or US$1.39 per share, down from US$181.2 million, or US$1.41 per share, in the same quarter of 2010. Results fell below the US$1.42 per share analysts polled by FactSet were expecting.
Revenue rose 7.8 per cent to US$1.19 billion from US$1.1 billion, matching analysts’ predictions. The company said its revenue at stores open at least a year — an indicator of a retailer’s health — rose five per cent, as the average price per unit sold increased. The increase in average price was partially a result of higher metals and diamond costs that were passed on to customers.
European sales increased just three per cent to US$142 million. Asia-Pacific sales jumped 19 per cent to US$225 million and Japan sales rose 12 per cent to US$204 million.
Sales in the company’s Americas region — which includes the US, Canada and Latin America — rose five percent to US$605 million on a same-store sales increase of three per cent. In the Americas, sales of items priced below US$250 fell, while demand increased for most of the company’s higher-priced product categories, company executives said on a conference call with investors.
The company said that some of the slow sales growth might have stemmed from restrained spending by people employed in the financial industry on the East Coast of the United States. In addition, higher silver costs, and the resulting product price increases, may have scared off some entry-level buyers, Tiffany said.
For the full year 2011, Tiffany reported net income of US$439.2 million, or US$3.40 per share, up from US$368.4 million, or US$2.87 per share, in 2010. Revenue rose to US$3.64 billion from US$3.09 billion.
Tiffany projected a 2012 profit of US$3.95 to US$4.05 per share, ahead of average Wall Street predictions of US$3.93 per share. Revenue is expected to rise about 10 per cent, largely as a result of higher Asia-Pacific and Americas spending, the company said.
Based on Tiffany’s 2011 results, the guidance suggests US$4.01 billion in sales, well ahead of average analysts’ predictions of US$3.91 billion.
Collins Stewart analyst Laura Champine backed her “Neutral” rating for Tiffany, but boosted her price target for the company by US$3 to US$69.
Champine said the company’s guidance “reflects aggressive expectations in the Americas”, in light of the recent slowdown in sales. She also noted that most of the sales growth in the Americas last year was driven by higher prices.
Tiffany said it expects to open 24 new stores this year, including five in the United Arab Emirates, marking its debut in that market.