Tiffany Q3 Earnings Sparkle On China; Movado Timed Out

Investor's Business Daily

Thanks to sizzling sales in China and other Asian markets, Tiffany outshone fellow jewelry and watch companies Signet Jewelers and Movado as the three reported Q3 earnings Tuesday.

Tiffany (TIF) profit jumped 49% to 73 cents a share, blowing past analysts' estimates by 15 cents. It was the fourth straight quarter of accelerating growth. Revenue rose 7% to $911 million. Analysts had expected $890 million.

Tiffany shares shot up 9% to 88.05, hitting a record high.

Mall-focused jeweler Zale (ZLC) weighed in late with a fiscal Q1 loss of 83 cents a share, but that beat analyst forecasts for a loss of 86 cents. Revenue edged up about 1% to $363 million.

Zale shares fell after-hours Tuesday after rising nearly 4% in the regular session.

Zale has lost market share to Signet (SIG), parent of Kay Jewelers and Jared. But analysts expect a profit in Zale's holiday Q2 and in Q3.

Foreign Demand

Tiffany clearly was queen of the day. Comparable-store sales rose 7%, led by a 22% surge in Asian comps. Strength was noted in fine and statement jewelry such as yellow diamonds and its Atlas collection of fashion jewelry.

The luxury retailer said in a conference call that it is "well positioned" for the holidays despite lingering economic and consumer uncertainties.

But same-store sales in the Americas — meaning the U.S. for the most part — were up only 1%. Wells Fargo analyst Paul Lejuez noted that branch sales in North America were likely flat to down and that Tiffany "may be having difficulty passing price increases through," unlike the luxury selling environment in Asia.

Tiffany said in the conference call that its New York flagship store enjoyed a "solid" gain, mostly from higher sales to tourists from China and Europe.

Signet said earnings fell 2% as expected to 42 cents a share, still hurt by last year's acquisition of jewelry outlet chain Ultra Stores.

Signet's overall sales rose 8% to $771.4 million, roughly in line with analyst views. Kay's same-store sales jumped 5.8%. Jared's rose 3%. U.K. sales fell slightly.

Signet sees EPS of $2.30-$2.40 vs. Q4 views of $2.36, on low- to mid-single-digit growth in same-store sales. Shares rose 2%.

CEO Mike Barnes said the holiday season will be supported by "new, innovative" advertising, as well as various tech initiatives.

Since the Thanksgiving-to-Christmas season will have six fewer shopping days than last year, Signet "will be very aggressive in its marketing efforts to get people in the stores," said Stephens analyst Rick Patel.

"Virtually all the retailers out there will be more aggressive from a marketing and/or promotional front," he said.

Movado is more of a wholesaler of fine and fashion watches than a retailer, but CEO Efraim Grinberg said it will have a "high impact" holiday ad campaign.

Movado's (MOV) earnings grew 33% to 89 cents a share, 2 cents above views. Revenue rose 18% to $189.7 million, above the $184 million forecast. Results were driven by strength in its namesake brand, the rollout of Scuderia Ferrari watches and the relaunch of Coach (COH) watches.

But Movado kept its full-year EPS guidance at $1.90 — 4 cents below consensus. Shares fell 4%.

"Gross margin came in a bit weaker than expected," Patel also noted. He blamed the firm's repositioning of its Coach watches to lower price points, meant to appeal to a broader clientele.

But Brean Capital analyst Eric Beder predicted "solid growth for at least the next three quarters as Coach and Ferrari mature and the namesake brand continues to take higher market share.

He kept his "aggressive" buy on Movado.

Movado forecast full-year sales at the high end of its guidance of $575 million-$580 million vs. analyst forecasts for $579.6 million.

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