Sales Shine at Tiffany

Earnings top Wall Street's estimate.
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Tiffany (TIF) - Get Report posted a slight rise in fiscal fourth-quarter profits as strong sales growth in its retail operations offset lower margins.

For the quarter ended Jan. 31, the jewelry seller's profit climbed to $140.5 million from $140.3 million a year earlier. Earnings per share jumped to $1.02 from 97 cents due to fewer shares outstanding in the most recent period.

The earnings included an impairment charge of 5 cents a share related to Tiffany's Little Switzerland business. Excluding the charge, the results beat Thomson Financial analysts' consensus estimate of $1.05 a share.

Total sales for the key holiday period increased to $986.4 million from $858.4 million a year earlier, topping Wall Street's target of $979.1 million.

In the U.S., retail sales rose 13% to $506.9 million, while same-store sales jumped 9%. The company's flagship New York store performed particularly well, with same-store sales rising 17%.

International retail sales increased 15% to $350.6 million, with same-store sales rising 6% on a constant-currency basis. Growth in most international markets offsetting weakness in Japan, where sales slipped 1%.

Tiffany's gross margin in the quarter fell to 57.2% from 58.8% a year earlier, which the company attributed to increased wholesale sales of diamonds, higher product costs and changes in sales mix. After several years of promoting its more-affordable silver jewelry, Tiffany is attempting to bolster its reputation as a luxury retailer through a heightened focus on diamond sales, which carry lower margins.

Looking ahead, Tiffany forecasts 11% to 12% sales growth for the current fiscal year, with a 15% rise in EPS. The company also said that first-quarter earnings are tracking in line with its expectation.

"We are now almost two months into the first quarter, and note that total worldwide net sales are tracking slightly above our growth expectations; at the same time, we are seeing a greater-than-expected shift in sales mix toward higher-end, lower-margin diamond jewelry," the company said.