Tiffany & Co. (TIF), the world's second-largest luxury-jewelry retailer, is slated to release its third-quarter results before the market opens Wednesday.
On average, 17 analysts surveyed by Thomson Reuters expect the company to post earnings of $0.24 per share for the quarter, with estimates ranging between $0.20 and $0.27 per share. Analysts' estimates typically exclude special items. Sales for the quarter are estimated to be $573.75 million, representing a 7.2% decline from last year.
For the same quarter a year ago, the New York-based company had generated net earnings of $43.8 million or $0.35 per share, on net sales of $618.23 million.
While announcing the second-quarter results, Michael Kowalski, chairman and chief executive officer, said, "While economic and retail conditions remain challenging, we were encouraged to see many stores achieving either smaller year-over-year rates of sales declines or modest sales growth compared with the past two quarters. More importantly, Tiffany's strong financial and operating position allows us to continue to expand our global presence in pursuit of robust, long-term growth."
In the prior year, many jewelry stores went out of business as the sales were hit hard by recession. However, major jewelry retailers are expecting higher sales in this holiday season, with some ease in the economy as well as lower competition. The holiday season is crucial for jewelry chains, as most of them record the majority of their sales and up to 100% of their profit in the period. According to the Wall Street Journal, the Commerce Department recently reported that jewelry sales at specialty outlets were down 10.2% for the first nine months of the year.
Tiffany in August raised its full year forecast, while noting that sales trends in August were meeting management's expectation. For the year, net earnings from continuing operations is now projected to be $1.65 to $1.75 per share, up from the previous forecast of $1.50 to $1.60 per share. Analysts expect full year earnings of $1.76 per share, within a range of $1.54 to $1.88 per share.
Brokerage Credit Suisse expects Tiffany to post fiscal 2009 earnings per share of $1.83.
The company now expects a full year worldwide sales decline of about 10%. Earlier, the company had expected a worldwide sales decline of nearly 11%. Analysts expect full year revenues of $2.59 billion, representing a 9.5% from last year.
On a regional basis, sales are projected to decline a mid-teens percentage in the Americas, a low-single-digit percentage in the Asia-Pacific region, a low-single-digit percentage in Europe, as well as a 50% decline in Other sales.
Regarding new store openings, the company said that due to the economic conditions, it was pursuing a more modest pace of store expansion this year and would increase the number of company-operated stores by about 6%.
Kowalski then added, "We're enjoying successful launches of new products, highlighted by our KEYS jewelry collection. And we've improved our cost structure to maintain a healthy level of profitability and strong liquidity. Most important, we believe the current environment provides opportunity for significant gains in market share and we remain excited about Tiffany's long-term prospects."
In a September 10 research note, Credit Suisse upgraded its rating on Tiffany shares to 'Outperform' from 'Neutral' and increased its price target to $45 from $20. Analyst Lejuez does not believe the business model has been permanently tarnished, while the company's business trends have suffered with the difficult macroeconomic environment. The analysts believe the company's carefulness to protect its brand image would enable an eventual recovery in top-line results.
According to the brokerage, despite precious metal, platinum and silver price decreases in fiscal 2009, Tiffany has not yet seen the benefit in gross margin due to their method of accounting and low inventory turns.
Founded in 1837, Tiffany operates jewelry and specialty retail stores and manufactures products through its subsidiary corporations. It sells fine jewelry, timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories, among others. Tiffany operates in the Americas, Asia-Pacific and Europe and engages in direct selling through Internet, catalog and business gift operations. As of July 31, 2009, the company operated 211 TIFFANY & CO. stores and boutiques, compared to 196 locations a year ago.
In its preceding second quarter, Tiffany's net earnings declined to $56.78 million or $0.46 per share from $80.77 million or $0.63 per share in the prior year, reflecting a tough economy that has virtually sealed luxury spending. Net sales fell 16% to $612.49 million from $729.63 million in the year-ago quarter. On a constant-exchange-rate basis, worldwide net sales declined 14% and comparable store sales declined 16%.
In the Americas, Tiffany's second-quarter sales dropped 23% and comparable U.S. store sales declined 27%. In the region, comparable branch store sales fell 26%, sales in the New York flagship store declined 30%, and combined Internet and catalog sales in the U.S. Fell 8%. Sales in Europe decreased 4%, while on a constant-exchange-rate basis, sales rose 13% due to incremental sales from new stores and broad-based comparable store sales growth of 5%. In the Asia-Pacific region, sales edged down 1% as sales growth in most countries was offset by a decline in Japan, and comparable store sales declined 4%.
Among others in the industry, Signet Jewelers Ltd. (SIG, SIG.L), the largest chain jeweler in North America, reported Tuesday a narrower loss for the third quarter, reflecting lower operating expenses that more than offset a decline in revenue. The Hamilton, Bermuda-based specialty retail jeweler reported a net loss of $7 million or $0.08 per share, narrower than $15.1 million or $0.18 per share in the previous year. Total sales declined 2.5% to $613.7 million from $629.3 million last year, and same store sales was down 1.9%.
Irving, Texas-based specialty retailer of fine jewelry Zale Corp. (ZLC) Tuesday reported a wider net loss for the first quarter of fiscal 2010, reflecting lower revenues and income tax expenses compared to an income tax benefit last year. The company's net loss was $57.62 million or $1.80 per share, compared with a loss of $48.38 million or $1.52 per share in the prior-year period. Revenues decreased 9.6% to $329.21 million from $364.13 million in fiscal 2009. Same store sales declined 6.8% in the first quarter compared to a 3.7% decrease in the prior year.
In a November 24 research note, KeyBanc Capital Markets initiated its coverage on Tiffany with a 'Buy' rating.
TIF closed Tuesday's regular trading session at $41.83, up $0.02 or 0.05%, on a volume of 3.5 million shares. In the past 52 weeks, shares have been trading in a broad range of $16.70 to $43.80, with a 3-month average volume of 2.48 million shares.
For comments and feedback: editorial@rttnews.com