Tiffany & Co. (TIF) declined the most in four months after cutting its full-year profit and sales forecasts as weaker-than-expected results in the U.S. signal that luxury shoppers may be shifting spending away from jewelry.
Tiffany, the world’s second-largest luxury jewelry retailer, fell 8 percent to $56.86 at 12:47 a.m. in New York, after dropping 9.6 percent for the biggest intraday decline since Jan. 10.
Smaller Wall Street bonuses and restrained spending from European tourists is hurting sales growth in the U.S., leading to a 4 percent decline in sales at Tiffany’s flagship store in New York. At the same time, affluent shoppers are now more inclined to open their wallets for shoes and handbags instead of luxury baubles, said Matt Arnold, an analyst for Edward Jones & Co.
“Jewelry is probably the weakest area of the luxury market right now,” Arnold, who is based in Des Peres, Missouri, said today in an interview. “It comes down to where the consumer sees the best bang for the buck.”
Signet Jewelers Ltd. (SIG), the operator of the Kay and Jared jewelry stores, today projected second-quarter profit that trailed analysts’ estimates, sending its shares lower. Saks Inc. (SKS) Chief Executive Officer Stephen Sadove said on a May 15 conference call that the jewelry business wasn’t growing as fast as bags and shoes.
Wall Street firms cut bonuses and delayed payments after investment banking and trading revenue dropped in 2011. The cash bonus pool fell by 14 percent last year to $19.7 billion, the lowest since 2008.
Tiffany’s profit excluding some items in the year ending Jan. 31, 2013 will be as much as $3.80 a share, down from a previous projection of a maximum of $4.05 a share, the New York- based company said today in a statement. Analysts projected $3.98, the average of 23 estimates compiled by Bloomberg.
Chief Executive Officer Michael Kowalski said sales in the Americas region, which accounts for about half of the jeweler’s sales, “underperformed, continuing a soft trend that began in the last quarter of 2011.” Sales in the first quarter rose 3 percent to $386 million in the Americas, compared with a 19 percent gain in the same period a year earlier.
Tiffany’s flagship store on New York’s Fifth Avenue strip of luxury emporiums has long been a mecca to bonus-wielding Wall Streeters and free-spending tourists.
“Weakness in the New York City local economy was a factor,” David Schick, an analyst at Stifel Nicolaus & Co, said in a telephone interview. “Luxury tourism from Europe also has slowed with the dollar stronger.”
New York Flagship
Schick, who is based in Baltimore and recommends investors hold the shares, had projected sales at the Fifth Avenue emporium to be little changed.
The flagship store accounts for 8 percent of worldwide sales and a little more than 40 percent of that comes from foreign tourists, Mark Aaron, a Tiffany spokesman, said at an investors conference last month.
After strong sales during the past three years, Tiffany also is coming up against tough comparisons, said Schick.
Revenue in the first quarter rose 7.6 percent to $819.2 million, compared with an increase of 20 percent a year earlier.
Sales this year will rise as much as 8 percent, less than a previous forecast of a maximum of 10 percent, Tiffany said.
Net income in the first quarter climbed to $81.5 million, or 64 cents a share, from $81.1 million, or 63 cents, a year earlier, Tiffany said. Analysts projected 69 cents, the average of 20 estimates compiled by Bloomberg.
Profit also was crimped by an 8.5 percent gain in selling, general and administrative expenses, Tiffany said, citing higher labor, store occupancy and marketing costs.
Cie. Financiere Richemont SA is the world’s largest luxury jewelry maker.
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