Tiffany's sparkle has a global tint

Second-quarter earnings beat Wall Street expectations, thanks to growing overseas sales, especially in China.

By Bruce Kennedy Aug 28, 2013 11:58AM

Tiffany (TIF) has a new sparkle, and it's not necessarily from its diamonds. After some well-publicized struggles, the jewelry retailer’s second-quarter earnings beat Wall Street expectations -- rising 16% to nearly $107 million dollars, or 83 cents a share, compared to around $92 million, or 72 cents a share, a year ago.


That per-share profit outran analysts' estimates by 9 cents, helped in part by sliding gold and diamond prices. The economic factors that had tarnished Tiffany's finances in recent years appear to be fading as the economic recovery gains momentum.


While the iconic, New York-based jeweler has a long history with U.S. consumers, and in American pop culture, Tiffany's overseas sales are behind its new shine.


Second-quarter global sales rose 4.4% to nearly $926 million, and that includes the impact of a depreciating yen in Japan, where Tiffany gets about 20% of total sales.


A Tiffany & Co. store front display is seen in Bethesda, Maryland (© Gary Cameron/Reuters)Tiffany has scored in the world's fastest-growing luxury market, China -- joining other high-end retailers like Prada (PRDSY) and Coach (COH) in attracting well-heeled Chinese. While Tiffany sales in the Americas were up just 2%, they jumped 20% in Asia-Pacific. Even sales in downtrodden Europe were up 11%.


North America remains Tiffany's biggest market, however, and analysts say the jeweler may be dealing with the same shopping doldrums facing other U.S. retailers across the economic spectrum.


Indeed, American consumers have gravitated to Tiffany's more affordable line of silver products, which make up 25% of sales and remain its most profitable category.


But the global market for high-end bling is picking up in the countries where Tiffany is expanding. Along with its growth in China, the jeweler recently announced plans to open a two-level store in Moscow, which will give Tiffany its first wholly owned retail business in Russia. Even a recent price increase apparently isn't deterring many shoppers.


What a difference a year makes, especially when you consider that Tiffany shares were under attack in 2012, after the company repeatedly cut its earnings forecasts. Analysts at Wells Fargo remain concerned that Tiffany's domestic sales, in their words, “lack dazzle." But there’s nothing dull about the stock’s run-up of about 43% so far this year.


And the stock could have room for more, with Tiffany now forecasting a profit in the $3.50 to $3.60 per share price range this year, or 7 cents above previous guidance.

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