Tiffany Surprises Investors With Optimistic Earnings Report, Share Price Jumps

Shares of luxury jewelry retailer Tiffany & Co.

were at a three month high Monday morning, following an earnings report that wasn't as negative as investors had expected. Tiffany & Co. reported revenues at $887 million, below the expected $890.85M, but two percent above the prior year. Worldwide net sales increased three percent, while in store comp sales declined one percent. The company went on to report an EPS of $0.72, below the estimated $0.73. Worldwide net sales for the first half of the fiscal year were up four percent over last year, while net earnings were up one percent. Of note was an increase in the Japanese market, where sales had increased 11 percent in the second quarter, and 13 percent in the first half. Tiffany's guided fiscal year earnings at $3.55-3.70 per share, lower than its initial forecast of $3.70-3.80 per share. The company also guided worldwide net sales to increase between six and seven percent, below the previous expectation of seven to eight percent. Furthermore, Tiffany & Co. expects to have opened a total of 28 new stores by the end of the fiscal years, five of which will be in the United Arab Emirates. Michael J. Kowalski, chairman and CEO of Tiffany & Co., said, “These second quarter results met the expectations contained in our previously-reported financial guidance. Not surprisingly, sales growth has been affected by economic weakness in a number of markets and by a very challenging prior-year comparison to a 30% increase in worldwide net sales. We also anticipated the reduced operating margin in the quarter, adjusted for nonrecurring items, due to continued, but moderating, high product input costs and a lack of sales leverage on fixed costs. The resulting decline in net earnings, when compared with last year's earnings excluding non recurring costs, was in line with our expectations and was on top of a 58% increase in last year's second quarter.” On an earnings call following the announcement, Mr. Kowalski went on to say that Tiffany & Co. plans to postpone its December Launch of Gatsby Jewelry. He also went on to say that the company has not raised prices this year, nor does it plan to. Following the call, Oppenheimer Holdings reiterated its Outperform rating of Tiffany & Co., and maintained its $75.00 price target, casting a vote of confidence in the company's recent performance. The company's share price has taken a tumble over the past year, down nearly 22 percent. Its decline in share price has primarily been attributed to lower sales in both Europe and New York due to the economic downturn, but following the company's earnings announcement, investors have become more confident in the company, giving its shares a boost.Some investors speculate that this could be an inflection point for the luxury retailer, but with the turbulent year for the company so far, it's hard to make predictions. Tiffany's jump in share price led to an optimistic outlook on the jewelry industry as a whole from investors. Shares of Zale Corporation

traded up Monday morning near 2 percent, while shares of Blue Nile

were up around 2.2 percent. Shares of Tiffany & Co. traded up about six percent Monday morning around $62.08.