Tiffany's lackluster earnings sparkle through

Middle-class consumers should be heartened by the luxury retailer's results.

By Jonathan Berr Aug 27, 2012 12:43PM
Shares of Tiffany & Co. (TIF), whose name has been synonymous with luxury for more than a century, are trading up almost 7% after the jewelry retailer posted quarterly results that were not as awful as Wall Street analysts had feared. 

Investors, even those living on a budget, need to remember that as Tiffany goes, so goes America -- in a roundabout way.

Net income rose 2% to $91.8 million, or 72 cents a share, as the company held the line on costs, with gains in Japan offsetting declines in the U.S. and Europe. Sales rose 1.6% to $887 million. Same-store sales, a key metric, fell 1%, which is not as bad as some analysts had feared. Tiffany was expected to earn 73 cents on revenue of $890.9 million.

The retailer also cut its profit outlook for the year to between $3.55 and $3.70 a share, versus an earlier projection of between $3.70 and $3.80. Wall Street expectations are for $3.64. Tiffany slashed its outlook for sales growth for the year to between 6% and 7%, from between 7% and 8%, as it plans to add 28 company-operated stores, including 13 in the Americas, eight in Asia-Pacific and two in Europe.

"Longer term, our management team remains enthusiastic about the opportunities we are pursuing in store expansion, product introductions and marketing that will contribute to solid growth," chief financial officer Patrick McGuiness said during the earnings conference call.

Tiffany's optimism is understandable. U.S. consumer confidence was unexpectedly higher in August, though still hardly robust. The latest Gallup data show that 60% of Americans believe the economy is getting worse.

However, there are some bright spots for Tiffany.

First, rough diamond prices fell 13% in the second quarter. They should remain stable if economic growth doesn't falter more than expected. Further, gold and silver prices are expected to decline this year because of soft demand in India, a major gold buyer, among other reasons.

In the darkest days of the Great Recession, the rich were reportedly reluctant to flaunt their wealth. That shyness is starting to fade as the economy continues its slow recovery. That means some consumers will not only spend $280,000 on a pair of Tiffany Lucinda diamond earnings but may even wear them in public.

Though most Americans could never afford such expensive baubles, they can take comfort in knowing that those who can afford them are buying them. If wealthy consumers spend, that will encourage those of more modest means to follow suit. Slowly but surely, the economic recovery will gain momentum. Growth is still so moribund that many Americans are not noticing much of a difference.

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






Tags: TIF
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120
120 rated 1
265
265 rated 2
460
460 rated 3
719
719 rated 4
629
629 rated 5
629
629 rated 6
622
622 rated 7
437
437 rated 8
319
319 rated 9
116
116 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.