Strong overseas sales and cost-cutting kept a decline in Tiffany & Co.'s third-quarter profit to a bare minimum, causing the luxury jeweler to raise its full-year profit outlook heading into the crucial holiday season.
The luxury sector has seen sales drop sharply during the recession, but Tiffany's results signal that the high end is on the mend, said Edward Jones analyst Matt Arnold.
"The main thing that sticks out to me is that trends continue to improve, and this should persist for a while," Arnold said.
Tiffany lifted its full-year forecast on efforts to tighten inventory and cut costs, sending shares up $2.06, or 4.9 percent, to $43.89 Wednesday.
U.S. sales declines are slowing and overseas sales are coming in better than expected, Tiffany said, while sales of lower-priced items fared better than more expensive jewelry.
Tiffany earned $43.3 million, or 35 cents per share, for the period ended Oct. 31.
Earnings from continuing operations were 34 cents per share, which included a $4 million charge related to a diamond sourcing deal and a $5.6 million tax benefit.
Revenue dropped 3 percent to $598.2 million.
Sales at stores open at least a year fell 6 percent. That figure is a key indicator of retailer performance because it measures growth at existing stores rather than newly opened ones.
The results handily beat Wall Street predictions for profit of 24 cents per share on sales of $575.1 million. The estimates of analysts polled by Thomson Reuters normally exclude one-time items.
Sales in the Americas declined 9 percent, with revenue at its flagship New York store off 8 percent, which represents 15 percent of total revenue. Even though overseas tourists aren't traveling as much to New York, which is hurting sales there, they're still spending at Tiffany stores in their own countries, Jones said.
Asia-Pacific sales rose 10 percent and European sales climbed 12 percent during the quarter.
Tiffany has tried to offset some of its sales weakness with cost-cutting and inventory management. Selling, general and administrative expenses declined to $261 million from $265.6 million, while net inventories were 6 percent below the previous year at quarter's end.
Tiffany said its inventory reduction is part of its plan to lower inventories by a single-digit percentage for the year.
The company, based in New York, boosted its full-year earnings from continuing operations guidance to a range of $1.88 to $1.98 per share. Its prior forecast was for a profit of $1.65 to $1.75 per share. The retailer anticipates annual worldwide sales will fall about 8 percent.
Analysts expect 2009 earnings of $1.77 per share.
Tiffany ran 215 of its namesake stores and boutiques at quarter's end, compared with 204 locations a year earlier. The company continues to expand and said it's on track to triple the number of Tiffany stores in mainland China in the next five years or so.
AP Business Writer Michelle Chapman in New York contributed to this report.