Tiffany regains some missing sparkle

Its latest results easily beat expectations as upscale shoppers show more willingness to buy luxury goods.

By Jonathan Berr May 28, 2013 12:43PM
A Tiffany & Co. store front display is seen in Bethesda, Md. (Credit: © Gary Cameron/Reuters)Tiffany & Co. (TIF), whose name has been synonymous with luxury since 1847, lost its luster with Wall Street in recent months after posting disappointing results. The company's latest earnings still aren't great, but they were good enough to prove to investors that high-end consumers are starting to open their wallets again.

Tiffany reported on Tuesday morning that net income in the latest quarter rose 2.5% to $83.5 million, or 65 cents a share, from $81.5 million, or 64 cents a share, a year earlier. Revenue climbed 9% to $895 million, fueled by growth in Asia, especially Japan, and in the U.S. as well. Comparable-store sales, a key metric of sales at locations open at least a year, rose 8%. Excluding one-time items, profit was 70 cents per share, easily topping the 53 cents analysts expected. The revenue figure exceeded the $854.6 million analyst had forecast.

Tiffany, which is based in New York and operates 275 stores around the world, remains bullish, not surprising given Tuesday's news that consumer confidence surged to its highest level in more than five years. The company said it plans to add a net of 14 new stores this year, including four in China, three in the U.S. and three in Europe. It also plans to revamp its website later this year.

Shares of Tiffany were up around 3.5% to nearly $79 in midday Tuesday trading.

Investors were pleased that Tiffany reiterated its profit forecast for the year of $3.43 to $3.53 per share even though it expects softer sales in the Americas and Japan for the rest of the year. Good news, however, is on the horizon. One market researcher cited by Jeweller magazine estimates that the luxury market in 2025 will be five times larger than it was in 1995.

Tiffany's latest results prove that more people are willing to try to make their champagne wishes and caviar dreams come true now than they were during the Great Recession, when even wealthy consumers were reluctant to spend. The gains, however, are not across the board.

Last month, Prada reported better-than-expected results while LMVH, parent of Louis Vuitton, disappointed investors. And KKR (KKR), the big private equity firm, reportedly is considering trying to arrange a merger between upscale department stores Saks (SKS) and Neiman Marcus. 

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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