Tiffany sparkles with nearly flawless quarter
NEW YORK — The economic headwinds so often cited by mass market retailers as a drag on financial results had no impact on luxury goods retailer Tiffany during the second quarter. The company’s earnings per share excluding non-recurring charges increased 58% to 86 cents, well ahead of the 70 cents analysts’ expected as the retailer’s customers didn’t let lingering unemployment and economic uncertainty dampen their enthusiasm for luxury goods.
“We are extremely pleased by these results, which confirm the growing global appeal of Tiffany's product offerings,” said Michael Kowalski, Tiffany’s chairman and CEO. “In addition, we have been able to absorb precious metal and gemstone cost increases while improving our gross and operating margins.”
Sales increased 30% to $873 million and net income increased 58% to $111 million, excluding non-recurring charges. The weak U.S. dollar had a powerful impact on the company’s results in several ways. Of the 236 stores Tiffany operates, only 98 are in the Americas, while there are 55 units in Japan, 52 in the Asia Pacific region and 31 in Europe.
Sales in the America’s rose 25%, and same-store sales increased 19%, but those figures were aided in large part by a 41% gain at the company’s New York flagship store where Tiffany’s prices seemed like relative bargains to foreign tourists. Even eliminating the beneficial effect of the weak dollar from international sales, Tiffany produced solid results. On a constant currency basis, sales in the Asia Pacific region experienced the strongest growth with a 45% increase followed by Europe where sales increased 17%. Even Japan, still reeling from the natural disasters earlier this year, saw sales advance 8% on a constant currency basis.
“Despite continuing economic uncertainty, our strong first half performance gives us ample reason to remain confident about our prospects for the balance of the year,” Kowalski said. “We are encouraged that total worldwide sales growth in the third quarter-to-date is continuing to exceed our expectations due to noteworthy strength in the Americas, Asia-Pacific and Japan, demonstrating, once again, the attraction of the Tiffany & Co. brand.”
Even with the escalating price of gold and stock market turbulence, which tends to have more of an impact on Tiffany’s higher income consumers, the company raised its full year profit forecast by a considerable amount. Full year earnings are now expected to range between $3.65 and $3.75 a share, up from a prior range of $3.45 to $3.55.
The company is banking on high teens sales increase in the back half of the year thanks to the addition of 17 new stores, including eight in the Asia Pacific region, and a full percentage point increase in its operating margin due to expense leverage.