[miningmx.com] — CONCERNS about slowing sales momentum took some of the luster off Tiffany & Co’s stock amid signs that European and US economic distress are weighing on luxury consumers, and shares fell 9%.
The upscale jeweler, a stock market darling for how fast its international business has grown, reported third-quarter earnings that beat analysts’ estimates but gave a holiday-quarter profit and sales outlook that missed Wall Street expectations.
Chief Executive Michael Kowalski said in a statement there had been “recent sales weaknesses in Europe and in the eastern part of the US”
And the company said there is reason to be cautious.
Chief Financial Officer Pat McGuiness told analysts on a conference call that Tiffany is “cognisant of the challenging economic conditions and uncertainties in a number of markets.”
Globally, Tiffany’s sales in the third quarter were up 17% in the third quarter, excluding the impact of currency translation.
But that is below the 19% pace of the first three quarters combined. The slowdown was limited to the Americas and Europe, which together make up nearly 60% of Tiffany’s business. In Japan, its second biggest market, and elsewhere in Asia, the pace picked up.
Tiffany’s shares traded late Monday at a forward earnings-price ratio of 23.31, above the 16.95 for the retail sector as a whole, according to Thomson Reuters.
That set up Tiffany’s shares for a fall at any sign of trouble, said Morningstar analyst Paul Swinand, calling them “richly” valued.
Another concern is that gross margin, a measure of profitability on jewelry sold, slipped, Swinand said.
Tiffany’s gross margin edged down 0.6 point to 57.9% in the third quarter, largely because it sold more pricey jewelry, which the company said has lower margins. The markup of very-high-end jewelry is typically lower, analysts said.
CLOUD ON LUXURY’S HORIZON
The mentions of trouble in Europe and the United States are the latest sign that months of stock market volatility and fears about global economic growth might finally be taking a toll on luxury consumers’ confidence.
In October, Saks Inc and Nordstrom Inc reported sales that disappointed Wall Street, and earlier this month Saks CEO Steve Sadove said the stock market’s gyrations gave the department store chain reason to plan “cautiously.”
Tiffany shares were down 9.03% to $66.98 and brought down other luxury chain’s shares. Saks was down 3.6%, Coach Inc 2.2% and Ralph Lauren Corp 2.7%. The Standard & Poor’s Retail Index was up 0.4%.
Still, Saks, Neiman Marcus Group IncNordstrom Inc all recently reported big sales gains for the most recent quarter. And on Monday, Neiman CEO Karen Katz said: “The most affluent luxury customer is spending with confidence.”
Tiffany expects sales to rise at a low-teens percentage rate for the holiday quarter. In the third quarter, sales at stores open at least a year, excluding the effect of currency translations, rose 16%.
