Tiffany Earnings Fall on Japan Sales Slump

Luxury jeweler Tiffany & Co. Inc. (TIF) on Thursday said its quarterly profit fell 11 percent, pulled down by lower sales in Japan and shrinking margins.

The company also forecast full-year earnings below analysts' estimates, and its shares fell nearly 6 percent.

The New York-based company said net income in the second quarter was $36.6 million, or 25 cents per share, compared with $41.1 million, or 28 cents in the year-ago period.

Analysts, on average, expected 29 cents per share, according to Reuters Estimates (search).

Sales rose 8 percent to $476.6 million in the quarter ended July 31, including a 2 percent boost from the weak dollar, which lifts the value of sales overseas for U.S.-based companies.

Sales at U.S. stores open at least a year rose 10 percent. But worldwide same-stores sales rose only 7 percent, dragged down by a 4 percent fall in Japan.

"As anticipated, Japan results continued to suffer from weak silver jewelry sales," Michael Kowalski, chairman and chief executive officer, said in a news release. "We are addressing that category with new products and targeted marketing."

Direct marketing sales also weighed on results with an 8 percent decline.

Gross margin fell to 55.7 percent from 57.6 percent in the year-earlier quarter due to charges for obsolete inventory, expansion of internal manufacturing and diamond sourcing and other items, the company said.

Tiffany forecast earnings of $1.55 to $1.60 a share for the year on a 10 percent increase in sales. Analysts on average had expected earnings of $1.64 a share, according to Reuters Estimates.

The company plans to expand square footage at its namesake stores by 7 percent in 2004, including plans for two new stores in Japan.