Photographer: SeongJoon Cho/Bloomberg      

Tiffany Profit Misses Estimates as Strong Dollar Hurt Sales

  • CEO says `volatile' economic conditions are slowing spending
  • Revenue falls 2.2 percent, trailing analysts' projections

Tiffany & Co. posted disappointing third-quarter profit and cut its annual forecast as the strong dollar and choppy economic conditions weigh on sales of luxury jewelry.

Profit was 70 cents a share, excluding some items, the New York-based company said in a statement Tuesday. Analysts estimated 75 cents, on average. Earnings per share will fall 5 percent to 10 percent this year, more than an earlier forecast for a drop of as much as 5 percent, the company said.

The results underscore the challenge that retailers like Tiffany face with the strong dollar, which curtails spending from tourists visiting the U.S. and reduces the value of revenue generated abroad. Chief Executive Officer Frederic Cumenal said in the statement that unsettled economies also are restraining shoppers’ appetites for luxury goods.

"Volatile, uncertain economic and market conditions in the U.S. and other regions are affecting consumer spending, causing us to maintain a cautious near-term outlook," Cumenal said.

Sales Miss

Third-quarter revenue dropped 2.2 percent to $938.2 million, trailing analysts’ $971.3 million average estimate. Net income more than doubled to $91 million, or 70 cents a share, from $38.3 million, or 29 cents.

The shares were little changed on Tuesday, trading at $76.64 as of 9:56 a.m. in New York. Tiffany had slid 28 percent this year through Monday.

Even after accounting for the effect of the strong dollar, Tiffany’s sales still trailed estimates in most of its operating regions. Comparable-store sales excluding currency effects fell 6 percent in the Americas, missing analysts’ average estimate for a 2 percent decline. Comparable sales rose 6 percent in Europe and 2 percent in Asia-Pacific. Analysts had estimated gains of 8.5 percent and 6 percent, respectively.

The only operating unit that topped estimates was Japan, where the 24 percent comparable sales gain beat the 11.7 percent increase that was projected.

‘Luxury Issue’

The weaker sales point to “a larger luxury issue,” said Laurent Vasilescu, an analyst at Macquarie. Instead of jewelry, luxury shoppers are "buying experiences, they’re buying big-ticket items.”

Signet Jewelers Ltd. also reported third-quarter results that trailed analysts’ estimates on Tuesday. Profit in the quarter was 33 cents a share, missing the 39-cent average projection. The shares fell 7.5 percent to $130.06 at 8:28 a.m. in early trading.

Cumenal, who became Tiffany’s CEO in April, is trying to build brand loyalty with a line of luxury watches and is pushing Tiffany into new markets through collaborations. Earlier this month, Tiffany partnered with edgy retailer Dover Street Market in an effort to appeal to younger consumers.

The holiday season will test the strength of U.S. consumers, who should give Tiffany a boost in North America in the fourth quarter as locals buy gifts, said Dorothy Lakner, an analyst at Topeka Capital Markets.

“Fourth-quarter tourism is less important than local customer demand,” she said. "That will be the litmus test."

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