Tiffany’s Profit Tops Estimates on Higher Prices

Tiffany & Co., the world’s second-largest luxury jewelry retailer, posted second-quarter profit that topped analysts’ estimates and raised its earnings forecast for the year as higher prices boosted revenue.

Net income rose 16 percent to $124.1 million, or 96 cents a share, in the three months ended July 31, from $106.8 million, or 83 cents, a year earlier, the New York-based company said in a statement today. Analysts projected 85 cents, the average of 25 estimates compiled by Bloomberg.

Chief Executive Officer Michael Kowalski, who will step down in 2015, has been working to refresh the retailer with revamped stores and new designs, including the Tiffany T collection in gold and silver. The U.S. and Asia-Pacific showed solid growth last quarter, the retailer said, while Japan and Europe sales fell short of predictions.

“The weakness in Japan and Europe might be tempering some of the excitement around the U.S.,” Brian Yarbrough, a St. Louis-based analyst at Edward Jones who recommends holding the shares, said in an interview. “The thing on the positive side to watch is if the silver business gets hot, that could be a driver for them.”

Tiffany rose 1 percent to $101.75 at the close in New York. The stock has climbed 9.7 percent this year, exceeding the 8.2 percent gain in the Standard & Poor’s 500 Index.

Profit this year will be $4.20 to $4.30 a share, the retailer said, up from a previous forecast of as much as $4.25. Analysts estimated $4.28, on average.

Affluent Customers

Tiffany’s affluent customers, buoyed by the rising stock market, have continued spending even as the chain increased prices. Last quarter, sales at stores open at least a year jumped 8 percent in the Americas and 7 percent in Asia.

Revenue climbed 7.2 percent to $992.9 million, topping the average prediction of $987.8 million.

Sales at stores open at least a year rose 3 percent, falling short of Consensus Metrix’s projection for a 3.9 percent gain. In Japan, sales on that basis slumped 13 percent, more than the estimated 6 percent drop, as consumers adjusted to an increase in the consumption tax. Europe had a surprise decline, of 8 percent, while analysts anticipated a 0.3 percent gain. Other retailers, including Ralph Lauren Corp., had seen increases as the region recovers from recessions.

President Frederic Cumenal will take over the top job April 1, the company said last month. Kowalski will remain on the board as non-executive chairman.

Tiffany ranks second to Cie. Financiere Richemont SA in global sales of luxury jewelry.