Tiffany stock a diamond in the rough

Jewelry could be this holiday season's biggest winner.

By TheStreet Staff Nov 29, 2010 12:50PM

Diamond ring © Lew Robertson/CorbisBy Jeanine Poggi, TheStreet

 

It's poised to be a glitzy holiday for jewelry retailers.

 

According to the National Retail Federation, the number of shoppers who purchased jewelry over the Black Friday weekend rose substantially, from 11.7% in 2009 to 14.3% this year.

 

Both comScore and Coremetrics also indicated improved growth in the jewelry category, up in the 15% to 20% range.

 

This could be a banner year for jewelry sales, says Craig Johnson, the president of Customer Growth Partners. His assessment reflects both a pent-up demand from the recession and the intrinsic value of jewelry as a hedge against inflation and the declining dollar.

Of course, Tiffany (TIF) is expected to be one of the biggest beneficiaries of this demand in jewelry.

 

Last week the high-end jeweler reported better-than-expected third-quarter profit and upped its full-year forecast.

 

During the quarter, Tiffany earned $55.1 million, or 43 cents a share, from $43.3 million, or 35 cents a share, a year earlier. Tiffany's sales grew 14% to $681.7 million, while U.S. same-store sales rose 5%. Analysts were calling for a profit of 37 cents a share on revenue of $652.8 million.

 

Tiffany also noted that it is seeing the return of higher-priced purchases. "We continue to see bifurcated performance, with declines in sales and transactions below $500, but double-digit percentage increases in most every other higher priced category," investor relations chief Mark Aaron said on a conference call with analysts. "This indicates to us diverging effects to one degree or another that the economy is having on consumer spending."

 

Tiffany now foresees full-year earnings in the range of $2.72 to $2.77 a share, from a prior outlook of $2.60 to $2.65.

 

"We are now a few weeks into the all-important two-month holiday season, and sales growth is exceeding our expectations, although the majority of the holiday season is certainly still ahead of us," CEO Michael Kowalski said.

 

Shares of Tiffany were bucking Monday's down market, gaining 0.1% to $60.65 in midday trading.

 

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