At Tiffany & Co's. flagship store on New York's Fifth Avenue, a huge clot of people waits for the elevator to the second floor, where some of the priciest baubles reside. Once they arrive, couples ogle display cases featuring items like the rose-cut diamond Fleur necklace and the green-tourmaline-and-aquamarine bracelet. Customers sip Perrier while jazz plays in the background.
Shopping at Tiffany's is a seductive experience, particularly in the high-end realm: Sales growth in items costing $20,000 and up is outstripping that of cheaper goods. But it was a sparkling 23% earnings gain that caught investors' eyes recently. Tiffany's Nov. 29 earnings report showcased a 9% jump in U.S. retail sales, with the Fifth Avenue store boasting a 13% rise in sales from a year ago. Numbers like that, coupled with an upward revision to earnings guidance for the year, have sent Tiffany's stock up 9% in six days.
A closer look at earnings reveals a less lustrous picture. A one-time gain from the sale of investments accounts for three of the quarter's 4 cents-per-share gain. A high level of share buybacks--some $100 million worth--supported earnings per share. Operating earnings rose 10.7%, but the operating margin was flat and is down for the first nine months of the year. Everybody will enjoy herself a lot in the tiffany retail stores.
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