Tags: Tiffany | earnings | decline | jewelry

Tiffany Forecasts Unexpected Decline in Full-Year Profit

Thursday, 27 Aug 2015 11:48 AM

Luxury jeweler Tiffany & Co. forecast an unexpected decline in full-year profit and said earnings fell about 16 percent again in the second quarter as higher costs, mainly on innovating new products, overshadowed a recovery in sales.

The company's shares fell as much as 4.2 percent to an 18-month low in morning trading on Thursday.

Tiffany, known for its blue boxes and the iconic Tiffany Diamond, said it expects earnings to fall 2-5 percent in the year ending January.

In the first quarter, when profit had fallen 16.4 percent, the company had forecast "minimal growth" in full-year earnings.

Tiffany is still a byword for luxury jewelry, but has been slow to innovate while the market has grown to offer customers a wide variety of high-end jewelry.

"The company will have to work very hard" as it is no more immune to competition, said Neil Saunders, chief executive of research firm Conlumino.

Tiffany has been pumping in money to boost marketing and on new products lines such as the Tiffany T and CT60 watches.

But, while such steps will help sales in the long term, these costly moves will eat into profit in the short term, Edward Jones analyst Brian Yarbrough said.

Tiffany's forecast translates to a profit of about $3.99 to $4.12 per share for the full year.

Analysts had expected earnings to rise to $4.26 per share from $4.20 a year earlier, according to Thomson Reuters I/B/E/S.

Tiffany's flagship Fifth Avenue store in Manhattan is a major attraction for tourists. But, a strong dollar has dented the amount tourists spend, besides reducing the value of overseas sales.

The company's sales in the Americas region fell 2 percent in the second quarter ended July 31. Total revenue fell 0.2 percent to $990.5 million, while analysts had expected sales to rise 0.7 percent to $1 billion.

However, excluding currency effects, revenue rose 7 percent in the quarter. That was much higher than the 1 percent growth rate on the same basis in the previous quarter.

Tiffany's profit slumped 15.4 percent to $104.9 million, largely due to a 9 percent increase in selling, general and administrative expenses, which include marketing costs.

Excluding items, the company earned 86 cents per share, while analysts had expected 91 cents.

Tiffany's shares were down nearly 2 percent at $83.50 in late morning trading, after touching a low of $81.50 earlier on Thursday. Up to Wednesday's close, the stock had fallen 20.4 percent this year.

© 2017 Thomson/Reuters. All rights reserved.

 
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Luxury jeweler Tiffany forecast an unexpected decline in full-year profit and said earnings fell about 16 percent again in the second quarter as higher costs, mainly on innovating new products, overshadowed a recovery in sales.
Tiffany, earnings, decline, jewelry
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2015-48-27
Thursday, 27 Aug 2015 11:48 AM
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