Tiffany Net Up However Issues Downbeat 1Q View

Tiffany & Co.’s (TIF) fiscal fourth-quarter earnings rose 0.7% from a prior year weighed down by headquarters relocation costs, while the jewelry retailer’s sales fell short of consensus estimates.

Tiffany warned it expects fiscal first-quarter adjusted earnings to decline about 15% to 20% due to gross margin pressure and higher marketing-related costs, while analysts were looking for flat profit. The company predicts earnings growth in all subsequent quarters.

The company forecast fiscal 2014 earnings from operations of $3.43 to $3.53 a share on 6% to 8% sales growth, in line with the current estimate of $3.50 a share on a 6% revenue increase to $4.04 billion from analysts surveyed by Thomson Reuters.

High-end shoppers have continued to snap up Tiffany’s fine jewelry, such as canary-yellow diamonds and engagement rings. But sales of silver jewelry–which carry a higher profit margin than fine jewelry–have declined of late as the retailer’s less well-heeled customers are swayed by a weak economy, cheaper knockoffs and what some consider a stagnant selection.

Tiffany has plans for an Art Deco collection of silver, onyx and freshwater pearls this spring, as a less-expensive complement to 1920s-style platinum and diamond jewelry it recently created. It also has been developing new products including a new metal alloy–a mix of gold, silver and copper it calls Rubedo–and Tiffany jewelry pieces fashioned from the pinkish-hued metal start at $250 for a small pendant.

For the quarter ended Jan. 31, Tiffany reported a profit of $179.6 million, or $1.40 a share, up from $178.4 million, or $1.39 a share, a year earlier. Last year’s per-share earnings were $3.60 excluding costs to relocate Tiffany’s New York headquarters staff.

The company’s November projection was for per-share earnings of $1.35 to $1.55, below consensus estimates at the time.

Sales increased 4.1% to $1.24 billion, short of the $1.25 billion forecast from Wall Street. Excluding the effect of foreign-currency translation, sales rose 5%.
Same-store sales were flat with the prior year.

Gross margin fell to 59.1% from 60.4%, partly due to pressures from precious metal and diamond costs and a sales-mix shift towards higher-priced, lower margin products.

Shares were trading 3.8% higher at $70.50 premarket. The stock has climbed 18% so far this year through Thursday’s close.

Source: Dow Jones  

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