Wall Street Journal
By Karen Talley
Tiffany & Co.'s fourth-quarter profit climbed 29% as the jeweler's international expansion continued but the company warned that the catastrophe in Japan will weigh on future results.
Sales were evenly split between the U.S. and overseas for the first time. The geographic diversity paid off, as results topped expectations.
The showing "demonstrates the power of a global expansion that has provided ... robust and sustainable growth," said Chief Executive Michael Kowalski.
Every geographic segment saw double-digit sales growth, including a 10% increase in the Americas—which accounted for the bulk of the total—and a 25% climb in the Asia Pacific region. Internet and catalog sales in the Americas were up 8%. In terms of international expansion, it has now set its sights on India.
The company, famous for its diamonds and its robins-egg blue boxes, has benefited from generally recovering demand for high-end goods.
Shares were up 5%, or $2.99, in early afternoon Monday to $60.25 on the New York Stock Exchange, rebounding from a sell-off last week on concerns about the outlook for sales in Japan.
Tiffany is one of the first U.S. retailers to publicly discuss the financial effects of the catastrophe in Japan, which accounts for 18% of the company's sales. The jeweler said it experienced a number of closings and the result of these events and other general disruptions in Japan would affect earnings by five cents a share in current quarter. It expects sales in Japan to fall 15% in the current quarter.
"We cannot forecast for Japan for subsequent quarters, so our expectation for the second, third, and fourth continue to call for sales roughly equal to the prior year in Japan," Chief Financial Officer James Fernandez said.
Mr. Fernandez's decision to avoid projecting further opens the door to earnings revisions for Tiffany, analysts said.
Japan has been a trouble spot for Tiffany, but the company was starting to see sales pick up until the earthquake hit. Now, at least for a time, the Japanese may not be eager to spend on the types of products Tiffany sells and tourism may be way down.
Tiffany's sales in Japan rose 7% for the year, but all of the increase was attributable to the currency-translation effect from a more-robust yen, which was 8% stronger than the prior year. On a constant-exchange-rate basis, total Japan sales for the year declined 1% and comparable-store sales fell 4%.
Tiffany, a company that is coming up on its 175th year, continues to see a dichotomy in the U.S., with certain merchandise that sells for less than $500 showing softness while higher-end items are moving.
For the new year, the company forecast earnings of $3.35 to $3.45 a share, with world-wide sales climbing 12% to 14%. That would be above the consensus forecast of analysts polled by Thomson Reuters, who were projecting a per-share profit of $3.25 on sales of $3.37 billion, which represents a 9.1% increase.
Tiffany forecast current-quarter earnings per share of 57 cents. It sees world-wide sales growth of 11% in the first quarter, despite the 15% decline in Japan. Analysts most recently expected earnings of 55 cents on a 14% sales increase.
For the period ended Jan. 31, Tiffany posted a profit of $181.2 million, or $1.41 a share, up from $140.4 million, or $1.10 a share, a year earlier. The latest result included three cents a share in costs related to the pending relocation of New York headquarters staff. Analysts most recently expected a profit of $1.39.
Total sales jumped 12% to $1.1 billion. Excluding currency changes, they rose 11%. Counting only stores open at least one year, sales were up 9%. Gross margin widened to 60.9% from 58.7%.
