Tiffany cuts full year earnings forecast on weak holiday sales

Tiffany & Co. cut its full-year earnings forecast following a holiday season damped by cautious spending in the U.S. and Europe, adding to worries that economic uncertainties in the regions have tempered demand from luxury shoppers.

The warning by Tiffany may reverberate to other high-end retailers, but is also specific to the company’s overseas growth. Tiffany did about half its business outside the Americas, according to the retailer’s annual report from last March, the latest data available. Europe, which is undergoing a debt crisis, and China, whose growth is seen as slowing, are significant markets.

Saks Inc. and Nordstrom Inc. don’t do anywhere that type of business outside the U.S. and haven’t issued earnings warnings. Saks, however, which has a pattern of topping analysts’ projects, posted December sales that were in line with expectations, according to Thomson Reuters.

After achieving strong and better-than-expected sales and earnings growth in the first three quarters of 2011, Tiffany said sales weakened markedly in the U.S. and Europe during the holiday season, reflecting restrained spending by consumers for fine jewelry. For its fiscal year ending Jan. 31, Tiffany now sees earnings of $3.60 to $3.65 a share, below its boosted November forecast for $3.70 to $3.80 a share.

The sales slowdown in U.S. and Europe confirms fears sparked in late November when Tiffany executives alluded to the European sovereign-debt crisis during a conference call to discuss fiscal third-quarter results.

For the two months ended Dec. 31, Tiffany reported world-wide net sales rose 7% to $952 million as same-store sales rose 4%. Sales in the Americas region–which includes the U.S., Canada and Latin America–rose 4% to $503 million. The company noted higher sales to tourists from outside the U.S. helped to offset weaker spending by U.S. customers.

In Europe, sales edged up 1% to $117 million. Same-store comparable sales declined 4%, reflecting modest sales growth in continental Europe and lower sales in the U.K. By contrast, Asia-Pacific sales jumped 19% to $165 million. Europe aside, a strong push into international markets has helped Tiffany post double-digit profit growth in each quarter this year.  

adapted from WSJ