Tiffany 4Q Profit Sinks, Still Beats View

Shoppers who were cautious about splurging on high-priced jewelry led Tiffany & Co. to report Monday that fourth-quarter profit tumbled more than 75 percent.

The Tiffany & Co. flagship store on Fifth Ave. is photographed Monday, March 23, 2009, in New York....

The Tiffany & Co. flagship store on Fifth Ave. is photographed Monday, March 23, 2009, in New York. Jewelry retailer Tiffany & Co. said Monday that its profit tumbled more than 75 percent in the fourth quarter following a steep drop in sales over the key holiday season. (AP Photo/Mary Altaffer)

(AP)

Enough people bought lower-priced items, though, that its earnings beat analysts' forecasts. Its shares rose 12 percent.

Tiffany said it believes its sales were hurt by the discounts offered by other jewelers and high end competitors. Although competition among jewelers remains intense, Tiffany still plans to maintain its prices to protect its cachet — symbolized by its famous blue box.

"We did and will continue with our full-price philosophy in order to maintain appropriate margins and, very importantly, to maintain the integrity of the Tiffany & Co. brand," Chief Financial Officer Jim Fernandez said on a conference call with analysts.

About 600 of Tiffany's U.S. employees accepted an early retirement package during the fourth quarter, which the company expects will help reduce its worldwide staff by 10 percent and save about $60 million before taxes this year.

Looking ahead, Tiffany is predicting 2009 earnings from continuing operations below Wall Street's current expectations. It expects to earn $1.50 to $1.60 per share on that basis, falling short of analysts' forecast of $1.66 per share.

Investors shrugged that off, however, sending Tiffany shares up $3.14, or 15.5 percent, to close at $23.37 Monday.

Tiffany said its earnings dropped to $31.1 million, or 25 cents per share, for the three months ended Jan. 31, down from $127.4 million, or 96 cents per share, a year ago.

Excluding costs related to job cuts and other one-time items, the retailer said quarterly earnings totaled 85 cents, better than the 80 cents expected by analysts polled by Thomson Reuters.

Sales dropped 20 percent to $841.2 million from $1.05 billion in last year's fourth quarter, but came in above the $838 million Wall Street expected. At Tiffany's flagship store on Fifth Avenue in New York, sales dropped 34 percent. The store represents 10 percent of total sales and is a popular attraction among tourists.