Tiffany results signal caution among luxury shoppers

Shares of Tiffany & Co., whose name has been synonymous with luxury since before the Civil War, fell Friday after the second-largest luxury retailer said its earnings would be less than analysts had expected.

The New York-based company expects to earn $3.65 to $3.75 per share in the fiscal year ended January 31. While that forecast is unchanged from a previous forecast, it was below the $3.79 that analysts surveyed by Bloomberg News had forecast. 

This is the latest sign of the uneven performance of many retailers during the holiday season despite the improving performance of the U.S. consumers. Wealthy consumers appear to be less enthused about buying goods and services than many experts predicted.

"I am optimistic with a small `o'," said Milton Pedraza, the head of the Luxury Institute, a market research firm, in an interview. "They didn't open their wallets as you would expect. That tells us that people are cautious going into 2014."
 
Tiffany's worldwide holiday sales rose 4 percent to $1.03 billion, fueled by gains in many regions including the Americas and Europe.  When currency fluctuations are excluded, revenue rose 8 percent while comparable sales, which measure activity at existing locations, jumped 6 percent. Shoppers took a shine to Tiffany's offerings, including a line of jewelry inspired by "The Great Gatsby."

As of December 31, 2013, Tiffany operated 286 stores around the world.  It recently opened new locations in New Orleans and Paris. A store in Moscow is due to open this year. The company has also recently overhauled its commerce site to better compete online. 

Tiffany's weak results surprised Wall Street, but the company's performance was superior to many discount retailers. Sears Holdings Friday posted holiday sales figures that were worse than the most pessimistic of Wall Street analysts had feared. Bed Bath & Beyond  and Family Dollar are among the retailers which have disappointed investors.

Further complicating the picture is continuing weakness in the labor market. U.S. employers added a weaker-than-expected 74,000 jobs in December. That was the smallest gain in three years. Investors, though, didn't hit the panic button since these figures are revised several times.

As for Tiffany, Wall Street doesn't appear worried that the stock will lose its luster. Most analysts rate the stock a "buy."  Their average 52-week price target is $94.23, about 5% above where it currently trades.
  • Jonathan Berr

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