Tiffany gives cautious 2014 forecast

Tiffany struck a cautious note on Friday about 2014, giving a profit forecast that was below estimates despite its projection that net worldwide sales would rise by a high-single digit percentage this year.

The company, which has bet its growth on emerging markets such as China and Russia, is likely being conservative because of growing economic and political uncertainty in some markets, and still sluggish growth of its less expensive silver jewelry in the United States, analysts said.

Tiffany, known for its blue boxes and Fifth Avenue flagship store in Manhattan, forecast a profit of $4.05 to $4.15 per share this fiscal year. Wall Street analysts projected $4.28 a share, according to Thomson Reuters I/B/E/S.

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After a painful 2012, when Tiffany lowered its bullish profit forecasts four times, the company has grown more cautious in its projections.

Customers carry Tiffany & Co. shopping bags outside the company's flagship store in New York, March 18, 2014.
Craig Warga | Bloomberg | Getty Images
Customers carry Tiffany & Co. shopping bags outside the company's flagship store in New York, March 18, 2014.

But this time, growing uncertainty in emerging markets was likely a factor too, said Edward Yruma, a KeyBanc Capital Markets analyst.

"They are being prudent given what's going in Russia and China," Yruma said.

The New York-based jewelry chain reported a 6 percent increase in sales at stores open at least a year for the fourth quarter ended Jan. 31.

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The company reported growth in all regions, including the United States, where it has struggled to find the right mix of expensive jewelry and more affordable silver items that generate one-quarter of sales.

But U.S. sales outside of its Manhattan flagship were slower, suggesting its less expensive jewelry, items that cost less than $500 but offer a higher profit margin, are taking some time to catch on with frugal shoppers, said Edward Jones analyst Brian Yarbrough.

Tiffany said that companywide, its fine jewelry led its sales growth.

Last year, Tiffany hired a new design director, Francesca Amfitheatrof, in part to improve its lower-price assortment.

Comparable store sales rose 4 percent in Asia, excluding Japan, led by gains in China, where Tiffany has been focusing much of its expansion. Sales had been tepid in the region in November and December, suggesting an uptick in January.

In Europe, sales rose 2 percent while in Japan comparable sales rose 8 percent, excluding a sharp drop in the value of the yen.

Overall sales rose 5.1 percent to $1.3 billion.

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The upscale New York-based jeweler reported a loss of $103.6 million, or 81 cents per share, in the fourth quarter, due primarily to losing an arbitrations ruling against Swatch Group. A year earlier, it recorded a profit of $179.6 million, or $1.40 a share.

Excluding the arbitration loss, which wiped out more than half of its 2013 profit, Tiffany earned $1.47 per share in the quarter, 5 cents below Wall Street expectations.

Shares fell 3.6 percent to $88 in premarket trading. (Click here for the latest quote)

By Reuters