March 22, 2019 / 11:15 AM / 3 months ago

UPDATE 3-Tiffany holiday-quarter sales miss expectations on weak tourist spending

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By Aishwarya Venugopal and Melissa Fares

March 22 (Reuters) - Tiffany & Co narrowly missed Wall Street estimates for quarterly sales on Friday, two months after the luxury retailer signaled soft demand in the holiday season because of low spending by Chinese tourists and weakness in Europe and at home.

Shares of the New York City-based company were down nearly 5 percent at $95.30 in early trading as Tiffany also stuck to its fiscal 2019 revenue and profit targets.

Weakening economic growth in China, especially against the backdrop of the trade spat between Beijing and Washington, has been a worry for luxury goods companies that rely on the country's burgeoning middle class to boost sales.

"Softer trends in the second half of the year reflected, in part, what we believe were external challenges and uncertainties," Chief Executive Officer Alessandro Bogliolo said in a statement.

The jeweler has refreshed its collections with more affordable items such as pendants and earrings to appeal to millennials who have been gravitating to lower-priced competitors such as Denmark's Pandora A/S and Signet Jewelers.

Tiffany also has invested in marketing to reach Chinese customers and tourists specifically.

Earlier in the year, the company blamed a stronger dollar for weak tourist spending globally during the crucial November-December period.

"Despite some softer top-line performance and better-than-expected cost control, we would categorize the release as generally clearing low expectations into the print, though the weaker gross margin will be a focus for us," William Blair analyst Dylan Carden wrote in a note.

The company also said it still expects a decline in per-share profit in the first half of the year, due to the external factors Tiffany flagged in the quarter. In the reported quarter, comparable-store sales dropped 1 percent as demand for engagement and designer jewelry fell.

Net sales from the Americas region, which accounts for nearly half of the company's total sales, were flat while those from the Asia-Pacific region fell 3 percent.

Tiffany's net sales fell to $1.32 billion, while analysts on average were expecting sales of $1.33 billion, according to IBES data from Refinitiv.

The company's net earnings rose to $204.5 million, or $1.67 per share, in the fourth quarter ended Jan.31, from $61.9 million, or 50 cents per share, a year earlier, when the company had higher provisions for income taxes.

Excluding one-time items, the company earned $1.60 per share, in line with expectations, according to Refinitiv IBES data. (Reporting by Aishwarya Venugopal in Bengaluru and Melissa Fares in New York; Editing by Arun Koyyur and Bill Trott)

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