Diamonds Tiffany's best friend

NEW YORK - Luxury jeweller Tiffany & Co yesterday reported quarterly earnings that topped Wall Street estimates on stronger-than-expected sales growth, and said it was on track to meet its first-quarter earnings forecast.

Quarterly sales, particularly in higher-end diamond jewellery, were strong across the United States and in most international markets, other than Japan, Tiffany said.

Net income was US$140.5 million ($196 million) for the fourth quarter ended January 31, compared with US$140.3 million a year earlier.

The latest earnings included a charge of US5c a share related to its Little Switzerland stores - its duty-free stores in the Caribbean, Key West and Alaska.

Net results were not a surprise, said Stifel Nicolas analyst David Schick, who has a "hold" rating on the stock.

"Tiffany has expanded its exposure to the rough cut diamond business," Schick said. "Because of that and because of [increased] precious metal costs and raw material costs it is not unexpected that sales were a little better and gross margins reported a little worse."

Quarterly sales rose 15 per cent to US$986.4 million, with its flagship store in New York City seeing a 17 per cent increase as more tourists took advantage of stronger foreign currencies, spokesman Mark Aaron said.

Tiffany is closing several underperforming boutiques and opening three new ones in Japan, which has posed problems for the company for a while.

After being associated with inexpensive items such as the silver charm bracelet it started selling 10 years ago, the company switched emphasis to costlier jewellery to protect its brand and keep richer clientele.

It has cited high-end offerings as the biggest reason for higher sales in recent quarters, though Lehman Brothers analyst Alan Rifkin said lower-end jewellery was just as vital for sales.

On February 26, Trian Fund Management, which owns a 5.5 per cent stake in Tiffany and is headed by billionaire financier Nelson Peltz, said it was working to boost shareholder value.

The company is on track to meet its first-quarter earnings forecast given strong Valentine's Day sales, chief executive Michael Kowalski said.

For all of 2007, the company expects earnings per share to increase by 15 per cent.

Net sales are expected to increase between 11 per cent and 12 per cent on a high-single-digit increase in US and international same-store sales, or sales at stores open at least a year.

The company also said it will open 17 new stores in 2007.

Tiffany shares rose 4 cents to US$45.54 in New York Stock Exchange trading. Tiffany shares traded at a 52-week high at US$45.98 after the Trian announcement.


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