Tiffany Beats, Guides Higher

Good news from Tiffany (TIF):

Tiffany & Co., the world’s second- largest luxury jewelry retailer, reported a 27 percent gain in third-quarter profit that topped analysts’ estimates as sales rose globally.

Net income advanced to $55.1 million, or 43 cents a share, from $43.3 million, or 35 cents, New York-based Tiffany said today in a statement. Excluding costs related to the relocation of headquarter employees, profit was 46 cents. Analysts projected 36 cents, the average of estimates in a Bloomberg survey.

Revenue gained 14 percent to $681.7 million, exceeding the $652.5 million average of estimates. Stock market gains have helped improve confidence among luxury consumers, who will be the “stellar spender” this holiday season, according to Michael P. Niemira, chief economist at the International Council of Shopping Centers.

Tiffany raised its full-year earnings forecast to as much as $2.77 a share, excluding some items. In August, the retailer predicted as much as $2.65 a share, an increase from a May forecast. Analysts estimated $2.65, on average.

Tiffany dropped 95 cents to $58.27 yesterday in New York Stock Exchange composite trading. The shares have gained 36 percent this year.

Sales at all luxury stores open more than a year will increase as much as 8 percent in November and December from a year ago, according to the ICSC.

That’s a very impressive earnings report. Tiffany beat by 10 cents per share, or nearly 28%. Sales beat estimates by over 4% and the company raised guidance to “as much as” $2.77 per share.

Tiffany really isn’t going out on a limb here since there’s only one more quarter left in their fiscal year (ending January). But Tiffany’s news catches my attention for a few reasons. One is that their business is heavily skewed to the holiday season.

Typically about half of Tiffany’s annual earnings come during the fourth quarter. If the third quarter was strong, that probably means the fourth will be as well. Of course that’s not a guarantee, but it does bode well.

The other reason to pay attention to Tiffany is that it’s a good way of seeing retail strength at the high-end. Tiffany tends to be very cyclical. When times are tough, folks generally cut back on the bling. Today’s report is evidence that wealthy consumers are not only doing well but that they’re willing to spend.

Posted by on November 24th, 2010 at 8:46 am


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