The company also lifted its full-year outlook, sending its shares up 5% to $66.25 in premarket trading. Its stock has risen 1.4% this year, outperforming the broader markets, but dropped 21% this month against worries that macroeconomic concerns and market volatility will dampen the sentiment of its upscale shoppers.
The company, however, appeared to shrug those concerns as well, saying its third quarter-to-date performance is continuing to exceed its expectations, with strength in the Americas, Asia-Pacific and Japan. It also said it’s been able to absorb rising precious metal and gemstone prices while improving margins. Second-quarter gross margin widened to 59% from 57.8%.
“Despite continuing economic uncertainty, our strong first half performance gives us ample reason to remain confident about our prospects for the balance of the year,” Chief Executive Michael Kowalski said.
Second-quarter net income rose to $90 million, or 69 cents a share, from $67.7 million, or 53 cents a share, a year earlier.
Sales in the quarter ended July 31 grew 30% to $872.7 million, and would have risen 24% excluding the currency translation impact. Comparable-store sales rose 22%.
Excluding expenses related to the relocation of its New York headquarters staff, the company said it would have earned 86 cents a share.
Analysts polled by FactSet Research had expected adjusted earnings of 70 cents a share on sales of $785.6 million.
Tiffany lifted its earnings forecast for the year to a range of $3.65 to $3.75 a share, from the previous projection of as much as $3.55. Analysts had been forecasting earnings of $3.55 a share for the year. Gains are expected across all regions, led by at least a 30% increase in Asia. Even Japan sales are expected to rise in the high-single-digit rate.
“Luxury spending has more momentum than one could fear given financial markets,” said Stifel, Nicolaus & Co. analyst David Schick.
In the Americas, sales rose 25% to $438.2 million. Comparable-store sales rose 24%. Sales in the New York flagship store increased 41%, helped by strong foreign tourist demand. Comparable branch store sales in the Americas increased 19% Internet and catalog sales increased 16%.
In Asia-Pacific, sales increased 55% to $173.2 million. They were still up 45% on a constant-exchange-rate basis. Comparable store sales minus currency impact increased 41%, led by growth in the greater China region.
In Japan, sales rose 21% to $142.5 million. They were up 8% excluding translation impact. On that basis, comparable store sales increased 8%.
In Europe, sales increased 32% to $101.3 million. On a constant-exchange-rate basis, sales increased 17% with same-store sales up 11%, reflecting growth in most countries.
At the end of the quarter, Tiffany operated 236 stores, including 98 in the Americas, 55 in Japan, 52 in Asia-Pacific and 31 in Europe.
Other sales increased 46% to $17.4 million, helped by wholesale sales of finished products to independent distributors within emerging markets, partly offset by a decline in wholesale sales of rough diamonds.
Andria Cheng is a MarketWatch reporter based in New York.
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