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Tiffany trims outlook on lower U.S. sales


#1

I have only had time to scan subject lines of most posts recently,
so this topic may have been covered recently; if so, I apologize.

The price of gold has been soaring and I have been using the
following web site to track it (I am trying to pick the optimal time
to recycle my scrap!): (kitco.com) This morning MarketWatch posted an
article about Tiffany’s poor Holiday sales and the general outlook
for the luxury/jewelry market. Thought some of you might want to read
it.

Theresa Bright

Tiffany trims outlook on lower U.S. sales
By Andria Cheng, MarketWatch

Last update: 12:15 p.m. EST Jan. 11, 2008

NEW YORK (MarketWatch) – In another sign that slowing
consumer spending may finally be hitting the luxury sector,
upscale jewelry retailer Tiffany & Co. lowered the top end of
its profit forecast on Friday after a decline in holiday sales
in the U.S.

The company’s shares had their largest decline in
three-and-a-half years. Full-year profit excluding items would
be as much as $2.28 a share, lower from a previous projection
of $2.30, the New York-based company said Friday.
Fourth-quarter profit excluding costs to write down some watch
inventory was expected to be $1.19 to $1.22 a share. Analysts,
on average, estimated profit of $1.22 a share in the fourth
quarter and $2.30 a share in the year, according to Thomson
Financial.

Tiffany shares dropped 13% to $35.04, their worst decline
since August 2004. Its drop led the decline in retail stocks.

Comparable-store sales in the U.S. for November and December
declined 2% after sales slowed for products costing more than
$50,000. International tourists that had boosted flagship
store sales in travel markets like New York weren’t enough to
make up for declines in suburban locations. Comparable sales
in Japan, one of Tiffany’s top markets, also declined more
than analysts expected. Declining housing and credit markets
have hurt the upper rung of the income bracket as well,
lessening the wealth effect, investors said.

“The upscale consumer isn’t bullet proof,” said Alan Lancz of
Alan B. Lancz & Associates, which has a short position on
Tiffany shares. “The consumer is going to pull back. It’s
going to hurt everyone.” Chart of TIF U.S. retailers on
Thursday
reported their worst holiday sales in five years after
economic concerns led to more budget-conscious shoppers. See
full story. Luxury retailers’ Saks Inc. and Nordstrom Inc.
showed a slowdown in sales growth rates.

“Up until the middle of last year, you can count on luxury
being there for you,” said Michael Niemira, chief economist of
International Council of Shopping Centers. “It’s been less
reliable. You also see some high end consumers weakening.”

Tiffany’s U.S. comparable-store sales decline missed the
company’s original forecast of a mid-single digit increase,
after a drop in the number of transactions. Total U.S. sales
rose 4% to $449.1 million. Comparable sales are a key retail
performance metric that excludes results from new and closed
locations.

“It was a challenging holiday season,” said Chief Financial
Officer Jim Fernandez on a conference call. “There is
uncertainty about macro conditions and the state of consumer
spending in the U.S.” While the New York flagship saw a 10%
increase in sales driven by foreign tourists, the seven
suburban locations in the New York area saw their
comparable-store sales falling 10%.

Engagement jewelry in the $10,000 to $50,000 range and silver
jewelry in the $500 to $1,000 range were the bright spots, the
company said. International sales rose 18% to $334.8 million.
Excluding currency transaction impact, sales increased 12%.
Same-store sales rose 5%, driven by gains in most countries.
Sales in Japan declined while Asian markets outside of Japan
surged 24%.

Tiffany said it’s increasing its store base by 12% to 15% this
year, mostly overseas, driven by demands in markets in Asia and
Europe. End of Story Andria Cheng is a MarketWatch reporter
based in New York.