Although Tiffany reported a "pretty significant miss" on earnings Thursday, one analyst said sales were actually fine at the luxury jewelry retailer and forecast that the company should begin to benefit from lower costs.
"Really what happened during the quarter was they sold more high-end pieces and less low-end silver-type products," said Brian Nagel, a senior equity research analyst at Oppenheimer. "That sales mix shift impacted gross margins."
During the quarter, Tiffany's gross margins fell to 54.4 percent from 57.9 percent in the year-ago quarter. Its results were also stung by a higher-than-expected tax rate and high precious metal and diamond costs.
But a decline in commodity costs should begin to help the jewelry retailer in the coming quarters, Nagel told CNBC's "Squawk on the Street." Nagel maintains an "overweight" rating and a $75 price target on the company's shares, which represents a potential upside of 25 percent.
"As you look over the next few quarters given the way Tiffany moves product through their system, you should see lower input costs," he said. "So they're going to begin to benefit from lower input cost reflecting a commodity price decline we saw a year, year-and-a-half ago just because they turn their inventory so slow. So that should benefit their gross margins going forward."
Investors have seen Tiffany's share price drop nearly 20 percent since its 52-week high in March amid economic challenges both domestically and abroad. On Thursday, the company cut its full-year profit estimate for the third time this year.
"From a historical valuation perspective, it's now trading pretty near a trough, a normalized trough valuation so I think the expectation is already pretty low for Tiffany shares," Nagel said.
Nagel cautioned against viewing Tiffany's earnings miss as a sign of weakness in luxury spending.
"If you're selling more high-end products, I think that's a testament to ongoing strength in that segment of the consumer population," Nagel said. But weaker silver sales do reflect ongoing struggles for the company's lower-end consumer to some extent, he added.
As the company enters the crucial holiday season, Nagel said its new products should help boost sales at the company, which has struggled against up-and-coming brands, such as David Yurman.
—By CNBC.com's Katie Little; Follow Her on Twitter @katie_little
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Brian Nagel does not own Tiffany stock.