TIFFANY CO cut its fiscal-year sales and profit forecasts yesterday for the second straight quarter, citing the tough global economy, weakness in key markets such as New York and Asia, and lower expectations for the Christmas season. But the reduction in the jeweller’s profit outlook was not as steep as many on Wall Street had feared.
Shares of the company rose more than 5 per cent on its expectations that pressure on margins from higher gold and diamond costs will moderate this quarter and that gross margin will rise again in the Christmas quarter because of lower costs.
The company reduced its global net sales growth forecast by 1 per centage point to range of 6 per cent to 7 per cent for the year ending in January. Tiffany lowered its full-year profit outlook to between $3.55 and $3.70 a share from $3.70 to $3.80, coming in line with Wall Street expectations of $3.64 per share.
Chief executive officer Michael Kowalski said in a statement that it was necessary to give a “prudent” forecast given the uncertainty slamming the world economy and its impact on consumer spending.
While other luxury brands such as high-end department store chain Saks proved resilient during the quarter, shoppers tend to pull back on buying jewellery more quickly than on fashion.
Also, Tiffany is far more exposed to Europe’s and China’s slowing growth than other high-end US names are.
Global sales at Tiffany rose 1.6 per cent to $886.6 million in the second quarter ended on July 31st.
Sales at stores open at least a year fell 1 per cent, excluding the impact of currency fluctuations.
Same-store sales dropped 5 per cent in the Americas and in the Asia Pacific region, which includes China, which has been the fastest-growing market for Western luxury brands.
Sales in Europe only got a boost because of exchange rates favourable to Tiffany.
Sales at the chain’s famous Fifth Avenue flagship store in New York, a favourite of the millions of international tourists, fell 9 per cent. That location generates almost 10 per cent of revenue.
In many ways, Tiffany’s growth was bound to be more modest than the 30 per cent pace of a year earlier. – (Reuters)
