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Tiffany Tumbles as Holiday Sales Disappoint

The Exchange

Tiffany (TIF) was slumping Thursday after the jewelry seller said holiday sales failed to meet its hopes for what is consistently its biggest period of the year, leading to the latest in a series of downbeat earnings outlooks issued over the past few quarters.

Normally, Tiffany records around a third of its yearly revenue in the fourth quarter, making the shopping rush of November and December critical to the New York-based merchant's full-year results. This time around, global net sales in fact rose 4% year-over-year to $992 million, but that's not a level of growth that will allow the company's revenue and income figures to meet the projections of management and analysts.

Recently, the stock was down 3.8% at $60.89, though that was actually above its lows. At its worst point of the session, $58.73, it was showing a loss of more than 7%, an unusually large single-day percentage decline for the shares.

Because of the sluggish results, earnings for the year ending Jan. 31 will probably be at the bottom end of Tiffany's expectation of $3.20 to $3.40 a share, well short of the average estimate of $3.65, according to FactSet. Even the current range isn't up to the goal Tiffany had started with. Coming into the fiscal year, it had a profit forecast of $3.95 to $4.05 a share, but it was lowered several times as the months passed.

Tiffany Earnings: Source FactSet

*For 2012, assumes earnings per share of $3.30, the midpoint of the current guidance.

Michael J. Kowalski, chairman and CEO of Tiffany, said in a press release that the company is set to add stores and introduce new products this year, but because of "uncertainty about general economic conditions in all our major markets, management is planning sales growth conservatively for 2013 and at this point expects net earnings growth of 6% - 9%."

With earnings of that level of expansion, a Tiffany investor would be anticipating net income of $447 million to $460 million, based on the consensus number of $422 million for this fiscal year. That would imply earnings per share of $3.49 to $3.60, calculated using the diluted shares outstanding at the end of the third quarter. In turn, that suggests a forward multiple of 16.9x even at the high end of the per-share profit, topping the FactSet five-year average of 16.2x for the shares.

Tiffany Sales: Source Tiffany

For the just-completed holiday period, Tiffany said same-store sales worldwide were flat with the 2011 season. The Asia-Pacific region, which covers 65 stores and not quite one-fifth of the total sales for the past two months, had the strongest percentage increase, with sales climbing 13% to $187 million. In the Americas, the largest geographical area, sales were up 3% to $516 million. At the midtown Manhattan flagship store, comparable sales fell 2%.

Had currency rates not changed, Japan would have had a sales increase of 1%, but owing to real-world dollar-yen fluctuations, total sales were down 5% to $153 million. Europe's sales rose 2% to $119 million.

Tiffany's stock had its best close in July 2011, at $83.82, a price it's now 27% below. The 52-week range is $49.72 to $74.20.