Tiffany Q3 Results Miss View, Affirms 2014 Earnings Outlook

(RTTNews) - Jewelry retailer Tiffany & Co. (TIF) on Tuesday reported a 60 percent decline in profit for the third quarter from last year as higher sales and margins were more than offset by a debt extinguishment charge.

Both revenue and adjusted earnings per share for the quarter missed analysts' expectations. Looking ahead to fiscal 2014, the company affirmed its earnings forecast, but lowered its outlook for sales.

Michael Kowalski, CEO of Tiffany, said, "We were pleased with overall sales performance, especially in light of economic and geopolitical challenges around the world. We continue to pursue exciting opportunities in marketing, merchandising and store expansion to support longer-term growth, and are especially encouraged with initial results from the recent launch of our TIFFANY T jewelry collection."

Tiffany's net earnings for the third quarter were $38.27 million or $0.29 per share, down from $94.61 million or $0.73 per share in the prior year. The latest quarter's results were impacted by a charge of $60.96 million or $0.47 per share on the extinguishment of debt related to the prepayment of $400 million of long-term debt.

Excluding the charge, adjusted net earnings for the quarter were $99 million or $0.76 per share. On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of $0.77 per share for the quarter. Analysts' estimates typically exclude special items.

Worldwide net sales for the quarter rose 5 percent to $959.59 million from $911.48 million in the year-ago period. Analysts were looking for revenue of $968.86 million for the quarter.

On a constant currency basis, worldwide net sales increased 7 percent due to growth in all regions expect Japan. The largest growth in the fashion jewelry category. Comparable store sales for the quarter rose 4 percent.

In the Americas, total sales rose 10 percent to $459 million and increased 11 percent when currency impact is excluded. Comparable store sales were grew 11 percent.

In Asia-Pacific, total sales increased 2 percent to $243 million. On a constant-exchange-rate basis, total sales increased 2 percent in the quarter, reflecting strong sales growth in mainland China that was mostly offset by mixed performance across other markets.

However, total sales in Japan declined 12 percent to $113 million, reflecting soft demand due to weaker economic conditions after a surge in consumer spending before an increase in Japan's consumption tax on April 1.

In Europe, total sales rose 9 percent to $114 million, while other sales grew 28 percent to $30 million.

Tiffany's gross margin for the quarter rose to 59.5 percent from 57 percent in the prior-year period, while operating margin expanded to 17.6 percent from 16.9 percent in the year-ago period.

Looking ahead to fiscal 2014, Tiffany affirmed its outlook for net earnings in a range of $4.20 to $4.30 per share, excluding the debt extinguishment charge.

The forecast now assumes a mid-to-high single-digit percentage growth in full-year worldwide net sales, compared to the prior forecast for high-single-digit percentage growth in sales.

Analysts expect the company to report earnings of $4.34 per share for the year on revenues of $4.36 billion.

TIF closed Monday's trading at $105.01. In Tuesday's pre-market activity, the stock is down $0.14 or 0.13 percent to $104.87.