Tiffany & Co., the world’s second- largest luxury jewelry retailer, fell the most in almost four years after citing “weaknesses” in sales in Europe and the eastern U.S. as the holiday season began.
Tiffany dropped 9.5 percent to $66.60 at 9:55 a.m. in New York, after earlier plunging as much as 13 percent for the biggest intraday decline since January 2008. The shares had gained 18 percent this year before today.
Fourth-quarter sales will grow in the “low-teens” in percentage terms after a 21 percent jump in the previous quarter, the New York-based company said in a statement today. Sales will have a “low double digit” gain in the Americas, Chief Financial Officer Patrick McGuiness said on a conference call today.
“We are, of course, mindful of continued short-term economic challenges and uncertainties in some markets,” Chief Executive Officer Michael Kowalski said in the statement. “Worldwide sales-to-date at this relatively early stage of our November-December holiday season are tracking in-line with our current expectations despite recent sales weaknesses in Europe and in the eastern part of the U.S.”
Tiffany also said that a key measure of profitability shrank as it sold more of its highest-priced diamond jewelry, which yields a lower gross margin.
Gross margin, or the percentage of sales left after the cost of goods sold, shrank to 57.9 percent from 58.5 percent a year earlier. David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore, had estimated 59 percent.
“The luxury consumer is slowing down as you might expect given the financial market turmoil,” Schick said in a telephone interview. “There was a lot of momentum in sales in the third quarter and that has clearly slowed down.”
Net income in the three months ended Oct. 31 climbed 63 percent to $89.7 million, or 70 cents a share, from $55.1 million, or 43 cents, a year earlier, Tiffany said. Analysts projected 61 cents, the average of estimates compiled by Bloomberg.
Profit in the year ending January 2012 will be as much as $3.80 a share, up from a previous forecast of a maximum of $3.75, Tiffany said. Analysts had projected $3.74, the average of 19 estimates. It reiterated its forecast for a “high teens” increase in annual sales.
Third-quarter sales advanced to $821.8 million, exceeding the $803.8 million average of 13 analysts’ estimates.
“It doesn’t look like the stock is positioned to get any credit for what was a very good quarter,” Matt Arnold, an analyst with St. Louis-based Edward Jones & Co., said in an interview. “There is plenty to like if you are a longer-term owner of this business,” said Arnold, who has a “buy” rating on the shares.
Cie. Financiere Richemont SA is the world’s largest luxury jewelry maker.
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