Tiffany Profit Falls on Items, Tops View

NEW YORK — Tiffany & Co. on Monday said its fourth-quarter earnings fell almost 16 percent, hurt by one-time charges, but its adjusted results beat analyst expectations and the jewelry retailer raised its outlook for this year.

The revised guidance topped Wall Street expectations, and its shares climbed almost 13 percent.

"Despite the slowdown in our U.S. business in the latter part of the year, our international business in total performed very well," said Chief Executive Michael Kowalski during a conference call with analysts on Monday.

Tiffany earned $118.3 million, or 89 cents per share, in the quarter ended Jan. 31, down from $140.5 million, or $1.02 per share, a year ago. Excluding one-time charges, profit was $1.27 per share, above the $1.21 analysts surveyed by Thomson Financial expected.

One-time items include a charge of 22 cents per share for loans to Tahera Diamond Corp., which sought protection from creditors in January, a charge of 9 cents per share for discontinuing some watches ahead of a licensing deal with Swatch Group Ltd. and an impairment charge of 7 cents per share related to lower-than-expected results from the company's Iridesse subsidiary.

Revenue rose to $1.05 billion from $958.9 million last year, matching analysts' predictions.

U.S. retail sales rose 4 percent to $527.9 million and same-store sales, or sales in stores open at least one year, fell 1 percent. Foreign tourist spending represented 14 percent of U.S. sales, up from 11 percent last year.

"Similar to what we have heard from many other retailers, we believe that fourth-quarter performance was affected by customers exhibiting some caution, tied to various macroeconomic factors," said Mark Aaron, Tiffany & Co. vice president of investor relations, during the conference call.

International retail sales rose 21 percent to $422.6 million, while same-store sales rose 6 percent.

Aaron said overall, sales were stronger in higher-priced categories. For example, fine jewelry sales from $10,000 to $50,000 were stronger than sales in the $1,000 to $10,000 range.

For the year, net income rose 20 percent to $303.8 million, or $2.20 per share, from $253.9 million, or $1.80 per share, last year. Revenue rose 15 percent to $2.94 billion from $2.56 billion last year.

The company said it remains "cautious" about the U.S. environment in 2008 but expects robust growth elsewhere in the world.

The company expects an adjusted 2008 profit of $2.75 to $2.85 per share. Analysts expect $2.49 per share. The analysts estimates typically exclude one-time items.

In February, Tiffany & Co. forecast earnings of $2.50 to $2.55 per share. The increase in guidance is due to strong 2007 results, as well as a boost from a change in its accounting method, Tiffany said.

Beginning in the first quarter of 2008 it will stop valuing the "last-in-first-out" inventory accounting method, which assumes products acquired last are the ones sold or disposed of first, and begin using an average cost method, which values the cost of inventory is based on the average cost of goods. Tiffany expects the move will help fiscal 2008 results.

Tiffany predicts sales will rise about 10 percent, implying sales of $3.23 billion. Analysts expect revenue of $3.18 billion. It expects a "slight decline" in U.S. same-store sales for the year.

"We are forecasting softness in the U.S. sales for the first half of the year, which in turn should lead everyone to expect pressure on earnings in the first and second quarters, before rebounding later in the year," said Chief Financial Officer Jim Fernandez during the conference call.

Shares rose $4.05, or 10.5 percent, to close at $42.65 Monday. They have traded in a 52-week range of $32.84 to $57.34.

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