Tiffany's cuts outlook amid slowing demand

Associated Press Modified: May 24, 2012 at 5:15 pm •  Published: May 24, 2012

NEW YORK (AP) — Tiffany & Co., a bellwether of luxury spending, says its sales aren't rising as fast as last year in the U.S. or abroad, and the gift and jewelry chain cut its forecasts for sales and profit for the year.

Tiffany delivered its lower outlook on Thursday as it reported first-quarter profit essentially the same as a year ago and below what analysts were expecting.

The news from Signet Jewelers Ltd, which targets a more moderate-income market, was similar. Signet reported lower sales than Wall Street expected, and it forecast slower growth.

Investors were spooked and drove down shares of several jewelry retailers. By mid-afternoon, Tiffany's stock fell nearly 7 percent, Signet's almost 8 percent.

The affluent had been spending more since the Great Recession ended in mid-2009, recovering faster than other people. But late last year, Tiffany and other luxury players saw them apply the brakes amid stock market volatility and growing worry about the debt crisis in Europe.

Tiffany said its sales to European tourists fell in the latest quarter.

"You are dealing with a global economic environment, and the high end is more susceptible to tourism," said Michael McNamara, vice president of research and analysis for MasterCard Advisors' SpendingPulse, which monitors all types of spending, including cash.

SpendingPulse figures show jewelry sales rose 10.2 percent in the third quarter of 2011 compared with a year earlier. But they rose only 7 percent in the fourth quarter and 5.3 percent in the first quarter of 2012. April sales actually fell 3.7 percent compared with a year ago, according to SpendingPulse.

The pullback crimped Tiffany's results. It reported net income of $81.5 million, or 64 cents per share, for the quarter that ended April 30, almost the same as its net income of $81.1 million, or 63 cents per share, a year earlier.

But the jeweler's revenue rose almost 8 percent to $819.2 million. And the long-term indicator of revenue at stores open at least a year rose 4 percent. That comparison is an important gauge of a retailer's health.

Analysts had expected earnings of 69 cents per share on revenue of $817.1 million.

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