The world's second-largest luxury-jewelry retailer Tiffany & Co. (TIF) on Wednesday posted a decline in its third-quarter profit, reflecting soft consumer demand. Further, the company lifted its fiscal 2009 financial forecast sending its shares up more than 6% in the pre market trading.
The New York-based company's third-quarter net income was $43.34 million or $0.35 per share, compared to $43.78 million or $0.35 per share in the year-ago quarter.
Net income from continuing operations declined to $43.31 million or $0.34 per share from $45.56 million or $0.36 per share in the same quarter of last year.
The company noted that the latest quarter results encompassed a $4.0 million charge related to a diamond sourcing agreement and a $5.6 million tax benefit which, together, were a benefit to net earnings from continuing operations of $0.01 per diluted share. The prior year results included a $4.3 million pre-tax charge, or $0.03 per share, related to a write-off.
On an adjusted basis, net income from continuing operations amounted to $41.2 million or $0.33 per share, compared to $48.3 million or $0.39 per share in the three months ended October 31, 2008.
On average, 18 analysts polled by Thomson Reuters expected the company to post earnings of $0.24 per share. Analysts' estimates typically exclude special items.
Quarterly net sales totaled $598.2 million, 3% lower than the previous year's net sales of $616.2 million, but surpassed the $575.09 million revenue consensus estimate of fourteen analysts polled by Thomson Reuters.
On a constant-exchange-rate basis, which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 5% and comparable store sales dropped 6%.
Michael Kowalski, chairman and chief executive officer, said, "We were pleased to see that the rate of sales declines in the U.S. lessened as the quarter progressed. At the same time, many countries in Asia-Pacific and Europe achieved considerably better-than-expected sales. These results, combined with ongoing expense restraint, contributed to earnings above our prior expectation."
The company's Americas business fetched third-quarter sales of $303.5 million, down 9% from last year, with comparable U.S. store sales decline of 10%. In the Asia-Pacific region, sales advanced 10% to $225.8 million from a year ago, due to improved results in most countries. On a constant-exchange-rate basis, sales rose 2%, and comparable store sales declined 3% in the most recent quarter.
Third-quarter sales were up 12% in the Europe business totaling 65.0 million, compared to $ in the same quarter of last year. On a constant-exchange-rate basis, sales rose 16% in the third quarter, and comparable store sales increased 9%. Other sales fell 81% to $3.9 million.
Gross margin was 54.8% in the recent quarter, a decline compared to 56.3% in the previous year, primarily due to higher product costs. Net inventories at October 31, 2009 were 6% below last year and have dropped 4% since the beginning of the fiscal year, consistent with management's objective, which is to reduce inventories by a single-digit percentage in the full year.
For the nine-month period, the company reported net income of $124.5 million or $1.00 per share, compared to $188.9 million or $1.49 per share in the prior-year period.
Net income from continuing operations decreased to $127.5 million or $1.02 per share from $194.7 million or $1.53 per share in the comparable period of the previous year.
Adjusted net income from continuing operations totaled $117.0 million or $0.94 per share, compared to $197.5 million or $1.55 per share in the same period of last year.
Net sales for the nine months ended October 31, 2009 were $1.73 billion, a decline of 14%, compared to $2.01 billion reported in the corresponding period of the previous year.
On a constant-exchange-rate basis, net sales and comparable store sales declined 13% and 15%, respectively.
Capital expenditures in the nine-month period were $46.9 million, a decline from the previous year's $108.5 million, reflecting fewer store openings and other cost containment.
Looking forward to the fourth quarter, Tiffany forecasts a mid-single-digit percentage increase in worldwide sales. Total sales growth in November-to-date is tracking favorably to management's expectation, but results in December are most relevant to the company's ability to achieve its outlook for the fourth quarter, the company added.
Meanwhile, the company raised its fiscal 2009 earnings forecast to $1.88 - $1.98 per share from continuing operations, from the previously communicated range of $1.65 - $1.75 per share. Thirteen Wall Street analysts have a consensus earnings estimate of $1.77 per share for the full year.
Worldwide sales for the full year is now estimated to decline about 8%, with a low-teens percentage decline in the Americas, the Asia-Pacific region equal to the prior year, a low-single-digit percentage increase in Europe, and a 60% downswing in Other sales. Earlier, the company had expected a worldwide sales decline of about 10%.
Further, the company currently expects a decline in the operating margin due to both a lower gross margin and the anticipated sales de-leverage effect on fixed costs, partly offset by savings tied to staff reductions and other cost-related initiatives. The company also anticipates capital expenditures of about $85 million for the full year.
Kowalski added, "...we have taken the steps necessary to ensure healthy levels of profitability and liquidity. Looking forward, we remain confident in the long-term growth potential of Tiffany, driven by new store, market and product opportunities, the ability to realize market share gains in a changed competitive environment, and the growing appeal of our core brand values of genuine luxury and lasting value in a more discerning consumer environment."
Among other players in the field, Signet Jewelers Ltd (SIG, SIG.L) posted a narrower loss for the third quarter totaling $7 million or $0.08 per share, compared to a loss of $15.1 million or $0.18 per share in the previous year, on lower operating expenses that more than offset a decline in revenue. Total sales for the quarter decreased 2.5% to $613.7 million from $629.3 million in the previous year.
Tiffany shares, which have been trading between $16.70 and $43.80 closed Tuesday's regular trading session at $41.83, up 2 cents or 0.05%. In the pre-market session, the stock is currently trading at $44.40, up $2.57 or 6.14%.
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