NEW YORK (AP) — Tiffany & Co.’s second-quarter net income rose 19 percent on higher revenue as shoppers bought more of its high-end jewelry around the world, particularly in Asia and Europe.
The chain known for its trademark turquoise boxes raised its full-year earnings guidance to a range partly above analyst estimates. CEO Michael Kowalski said Tiffany looked forward to the second half “with a sense of guarded optimism.”
Net income met expectations but revenue fell short, and it said third-quarter growth would be “somewhat restrained” because of higher marketing spending. The luxury industry is recovering from the recession, which spurred shoppers — even at the high-end — to spend less as they grappled with uncertain investments and employment prospects.
Shares fell $1.33, or 3.2 percent, to $40.71 on heavy volume Friday, possibly as investors worried about companies so heavily dependent on shoppers.
“I think people are just looking at that as an excuse to reduce exposure to the consumer,” said KeyBanc Capital Markets senior analyst Edward Yruma.
As the economy gradually recovers, sales have ticked up in the luxury sector — although shoppers are so fickle and swiftly changing their habits that nothing is certain. The company said it has seen revenue grow in the third quarter at a low double-digit percentage from last year.
Yruma said shoppers are being cautious. But “where the consumer sees a need and sees quality, they’re willing to pay,” he said.
A broad rebound in consumer spending — which, including big-ticket items like health care and housing, accounts for about 70 percent of the gross domestic product — will be critical to any economic recovery. And recovering luxury spending is seen as a harbinger.
In the quarter ending July 31, the New York company earned $67.7 million, or 53 cents per share. That’s above the $56.8 million, or 46 cents per share, the company earned in the year-ago period.
Excluding one-time items, Tiffany earned 55 cents per share — 2 cents above analyst estimates, according to Thomson Reuters.
Revenue rose 9 percent to $668.8 million, below estimates of $690.2 million.
Engagement jewelery sales were strong and transactions in most price ranges grew, although the company saw lower revenue and sales for transactions worth $500 or less. Tiffany said that could be because of comparisons with last year and also people’s continuing worries about the conomy.
Demand was healthy for gold and platinum jewelry — more expensive than other metals — while silver jewelry was flat with last year.
Roughly half of Tiffany’s revenue now comes from outside the U.S. Growth in the Asia-Pacific region, excluding Japan, was the strongest in the quarter as those economies continue to prosper. Revenue there jumped 21 percent to $111.5 million. Tiffany opened its 12th store in China in the quarter — in Shanghai — and its fourth in Singapore.
Tiffany’s business has been hurting for several years in Japan, Yruma said, and the entire luxury sector is down there because of the weak economy. Japan’s revenue rose 4 percent to $118 million.
Revenue at the company’s flagship store in New York rose 8 percent in the quarter, mostly due to spending from tourists. Overall revenue in the Americas also grew 8 percent, to $350.4 million.
Revenue in Europe rose 14 percent to $76.9 million.
Worldwide, revenue at stores open at least a year rose 5 percent on a constant currency basis. That’s an important measurement for retailers because it measures growth at existing locations.
Tiffany now expects net income to range from $2.60 to $2.65 per share this year, above its prior estimate of $2.55 to $2.60, which it had increased in May. Analysts expected $2.61.
Tiffany plans to open 14 new stores this year: five in the Americas, seven in the Asia-Pacific region and two in Europe. The company operated 223 stores and boutiques at the end of July, up from 211 a year earlier.