NEW YORK – Tiffany & Co. said Friday that its second-quarter profit fell but beat analyst expectations as its steep sales declines moderated, providing a sparkle of hope amid the moribund luxury market.
The luxury retailer also raised its full-year earnings guidance, sending shares up nearly 9 percent by midday.
"While economic and retail conditions remain challenging, we were encouraged to see many stores achieving either smaller year-over-year rates of sales declines or modest sales growth compared with the past two quarters," Chairman and CEO Michael Kowalski said in a statement.
The luxury sector has seen freefalling sales, as consumers cut back on higher-ticket items amid the recession. Neiman Marcus' sales declined 24 percent in the most recent quarter. Saks Inc.'s fell 15 percent.
But there have been some small signs of improvement: last month Coach Inc. said sales of full-price handbags were improving, though still weak. Tiffany's results are another sign, an analyst said.
"Tiffany results show high-end jewelry trends are setting a bottom," said Jefferies & Co. analyst Randal J. Konik.
The company known for its signature blue box earned $56.8 million, or 46 cents per share, for the period ended July 31, down 30 percent from $80.8 million, or 63 cents per share, a year ago. Excluding a benefit of 7 cents per share related to loan recovery and tax reserve adjustments, net income was 39 cents per share.
Analysts forecast profit of 33 cents per share, according to a Thomson Reuters survey.
Sales dropped 16 percent to $612.5 million from $729.6 million, but still topped Wall Street's estimate of $602.1 million. That was a bit better than the 22 percent and 20 percent drops in the previous two quarters.
As in previous quarters, sales of jewelry price at more than $50,000 was weakest, while lower-priced items such as silver and gold fashion jewelry fared better. Tiffany has not lowered prices but added more items to the mix at lower prices. Its new collection of key pendants, for example, starts at $150 and goes up to $15,000.
Sales at U.S. stores open at least a year dropped 27 percent. At its flagship New York store, sales were off 30 percent. Combined Internet and catalog sales for the U.S. fared a bit better, posting an 8 percent decline.
"We're pleased that sales trends in the first half have been moving in the direction we've planned and believe the picture will brighten further in the second half when we compare to the steep sales declines last year," said Mark Aaron, vice president of investor relations.
The retailer had smaller dropoffs overseas, with sales for the Asia-Pacific region dipping 1 percent and European sales down 4 percent. The lower yen helped sales.
Japan sales were weak but outside of that retail sales rose 14 percent, as same-store sales rose 5 percent.
Like many retailers trying to navigate through the economic downturn, Tiffany has tightly controlled inventory and cut costs.
Konik said the New York company is "doing an exceptional job with cost and inventory control and new product development."
Tiffany now expects 2009 earnings from continuing operations of $1.65 to $1.75 per share, above analyst expectations and up from a prior outlook of $1.50 to $1.60 per share.
Still, "our full year sales forecast assumes no meaningful change in economic conditions from the current environment," Aaron said. "So we have not changed our sales and earnings expectations for the second half of the year, and I should also add that we have no plans for store closings."
Shares rose $2.86, or 8.5 percent, to $36.60 during midday trading.
AP Retail Writer Michelle Chapman in New York contributed to this report.
NEW YORK (Reuters) –
Intel Corp (INTC.O) raised its outlook for third-quarter revenue on stronger-than-expected demand for its microprocessors and chipsets, offering the latest signal that spending on computers is on the upswing.
Shares of the world's largest chipmaker jumped as much as 6 percent on Friday, making it the top percentage gainer in the Dow Jones Industrial Average, after it revised a forecast it had issued just last month.
Third quarter revenue, it said, is now likely to run between $8.8 billion and $9.2 billion, up from the earlier outlook of $8.1 billion to $8.9 billion. Gross margins, meanwhile, should be in the upper half of its previous range.
Intel's microprocessors are used in more than three-quarters of the world's personal computers, so its results are seen as a barometer for the global PC sector. Combined with better-than-expected earnings on Thursday from Dell Inc (DELL.O), Intel's new forecast suggests that consumer demand is rebounding.
What is more, the strongest stretch of the third quarter usually comes in the final weeks, said Arnab Chanda, an analyst at Roth Capital Partners. "So the fact that Intel's preannouncing positively in the third quarter before the last month, that's actually a very good sign for business in the PC industry."
To be sure, optimism for the technology sector may be dampened by a lingering reluctance by corporations to spend on new systems. Last week, Hewlett-Packard Co (HPQ.N) posted slightly better than expected third-quarter results but expressed caution about business demand, an area of concern also for Dell, whose enterprise units continue to struggle.
"I think this is really great news for the overall PC industry," said Carlos Guillen, analyst at Wall Street Strategies. "Dell (results) showed signs that the consumer was picking up its spending. Overall, corporate is down and it is a large portion of their revenue. But the consumer continued to increase purchases, which was definitely a good sign."
While Intel raised the midpoint of its revenue forecast by about 5.8 percent, and narrowed the range, its most optimistic view still falls short of the $10.2 billion in revenue it reported for the same period one year ago.
Still, much of the tech sector received a lift from Intel's forecast, which also stated that gross margin would be in the upper half of its previous 51 to 55 percent range.
Shares of Intel were up 83 cents, or 4.3 percent, to $20.30 in active trade on the Nasdaq, with Microsoft Corp (MSFT.O), Cisco Systems Inc (CSCO.O) Hewlett-Packard and Dell also outpacing the broader market.
(Editing by Gerald E. McCormick and Steve Orlofsky)
NEW YORK (Reuters) –
A weekly measure of future U.S. economic growth slipped in the latest week, though its yearly growth rate surged to a 38-year high that suggests chances of a double-dip recession are slim.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index for the week to August 21 fell to 124.4 from a downwardly revised 124.9 the prior week, which was originally reported at 125.0.
But the index's annualized growth rate soared to a 38-year high of 19.6 percent from a downwardly revised 17.4 percent the prior week, a number which was originally 17.5 percent.
It was the WLI's highest yearly growth rate reading since the week to May 28, 1971, when it stood at 20.5 percent.
"With WLI growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question," said ECRI Managing Director Lakshman Achuthan, reinstating the group's recent warning to ignore negative analyst projections.
He added that the index was pulled down this week due to higher interest rates.
Achuthan has recently projected that the recovery is moving at a stronger pace than any the United States has seen since the early 1980s.
(Reporting by Camille Drummond, Editing by Chizu Nomiyama)