- The Washington Times - Saturday, May 30, 2009

NEW YORK | Jewelry retailer Tiffany & Co. said Friday that its first-quarter profit plunged 62 percent as sales tumbled while consumers continued to shy away from luxury purchases.

Still, the earnings matched Wall Street’s expectations and the company maintained its profit outlook for the full year. Tiffany said it cut spending in the first quarter to offset weak sales by cutting 10 percent of its staff - or 900 people - and lowering marketing spending.

Tiffany, like many other luxury companies, has seen sales soften as consumers cut back on big-ticket, discretionary purchases amid the recession. Tiffany said sales of items over $50,000 were particularly weak, and lower-priced silver and gold jewelry performed better.

The New York retailer earned $24.3 million (20 cents per share) for the three months ended April 30, down from $64.4 million (50 cents) a year ago.

That matched expectations of analysts polled by Thomson Reuters.

Edward Jones analyst Matt Arnold said U.S. sales were worse than expected but the company was able to make up for the shortfall elsewhere.

“The diversification of the company kind of shined through here,” he said. “Other geographies picked up the slack and enabled the company to come in okay.”

“Despite reduced consumer demand in the luxury sector, Tiffany is, and is projected to remain, solidly profitable and will generate substantial cash from operations,” Chairman and Chief Executive Michael J. Kowalski said.

Sales fell 22 percent to $523.1 million from $668.1 million a year ago and below analysts’ expectations for revenue of $533 million.

The biggest sales drop was in the Americas, where they slid 31 percent, with U.S. sales in stores open at least one year down 34 percent. That includes a 42 percent sales drop at its New York flagship store.

The company said the drop was due to less spending by financial-sector employees and a drop in foreign tourists.

However, Tiffany said the drop in tourism might have benefited European stores, where same-store sales rose 3 percent and total sales fell 8 percent, mostly due to the stronger dollar. Sales in Asia-Pacific fell 9 percent.

Excluding the impact of the stronger dollar, worldwide sales slipped 18 percent and same-store sales dropped 21 percent.

Chief Financial Officer Jim Fernandez said Tiffany faced tough competition during the quarter.

“Our business in the U.S. is being affected by challenging economic conditions, but we’re also facing a headwind from continued heavy and unprecedented levels of discounting by many competitors, including liquidation sales by some who will likely be closing their stores,” he said in a conference call.

In an effort to cut costs, the company has reduced catalog mailings and has begun to rely more on e-mail messages.

“They’re doing a good job navigating what’s going to be a really tough environment for luxury goods,” analyst Mr. Arnold said.

Tiffany reaffirmed its guidance for full-year earnings from continuing operations of $1.50 to $1.60 per share. Analysts expect profit of $1.56 per share.

The company ran 209 stores and boutiques at quarter’s end, up from 192 shops a year earlier.

Tiffany shares gained 24 cents to close at $28.37 Friday.

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