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Tiffany Sees Profit at Low End of Forecast on Weak Sales

Tiffany Sees Profit at Low End of Forecast on Weak Sales
Tiffany projects earnings growth in 2013 of 6 percent to 9 percent. Photographer: Chris Ratcliffe/Bloomberg

Tiffany & Co., the world’s second-largest luxury jewelry retailer, said full-year earnings will be at the low end of its forecast after holiday sales growth slowed in the Americas and Asia. The shares fell.

Sales in November and December rose 4 percent to $992 million worldwide, the New York-based company said today in a statement. That was slower than the 7 percent gain Tiffany recorded in the same period a year earlier.

High-income consumers’ confidence waned in the U.S. as the prospect of higher taxes approached, David Schick, an analyst at Stifel Financial Corp., who recommends holding the shares, wrote in a Jan. 7 note. Additionally, sales of lower-priced jewelry continued to be under pressure during a muted holiday season for most retailers, he wrote. China’s luxury spending also cooled.

Tiffany dropped 4.5 percent to $60.40 at the close in New York, the biggest decline since Nov. 29. Cie. Financiere Richemont SA, the world’s largest luxury jewelry maker, fell 2.1 percent to 76 Swiss francs in Zurich.

In the Americas, which includes the U.S., Canada and Latin America, Tiffany’s holiday sales rose 3 percent. Sales in the region increased 4 percent a year earlier. In Asia, sales growth shrank to 13 percent from 19 percent a year earlier.

European sales gained 2 percent, compared with an increase of 1 percent a year ago.

Annual Forecast

Profit excluding some items will be at the low end of its previous forecast of $3.20 to $3.40 a share in the year ending Jan. 31, the company said today. Analysts projected $3.31, the average of 21 estimates in a Bloomberg survey. The company earned $3.60 a share in the year ended January 2012.

“Due to uncertainty about general economic conditions in all our major markets, management is planning sales growth conservatively for 2013,” Chief Executive Officer Michael Kowalski said in the statement.

Tiffany projects earnings growth in 2013 of 6 percent to 9 percent.

“The shortfall in the fourth quarter and reasoning for the conservative 2013 outlook was primarily weakness in U.S. sales,” Liz Dunn, a New York-based analyst at Macquarie Group, said via e-mail. “This is particularly disappointing after multiple negative revisions to guidance throughout 2012 and the gross margin weakness acknowledged last quarter.”

Dunn, who has a neutral rating on the stock, said Tiffany may take several quarters to improve sales in its silver range.

Tiffany will report fourth-quarter earnings on March 22.

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