Tiffany Profits Surge

I have posted several times in the recent past about the strength of the luxury market.  This is despite the global economic struggles of many governments and weaker confidence by many consumers.

Tiffany has just released second quarter results and the exceeded expectations. Additionally, Tiffany expects third quarter results to be strong as well despite the increased prices of gold and silver. According to a Forbes blog post Tiffany net earnings increased 33% on a 30% increase in sales. Sales for the quarter were $872.7 million. Th fine and decorative art markets are closely associated to the luxury market. We know from the results of Christie's and Sotheby's that 2011 has been a record breaking year.

The strength generally appears isolated to the upper markets, with quality items easily selling at premiums. Below the upper quality levels, many market sectors are struggling and showing a lack of strength. The Forbes piece does mention that lower-end stores and chains such as Wal-Mart, Dollar General and Target are reporting lower sales.

Forbes reorts on the Tiffany earnings release

Tiffany is clearly firing on all cylinders, at a time when the retail industry looks like a barbell. Based on the latest batch of earnings reports higher-end stores like Tiffany are cleaning up, as are lower-end names like Dollar General and Target (with the notable exception of Wal-Mart‘s weaker sales), while mid-tier chains and restaurants are getting squeezed on both ends: high-income shoppers don’t frequent those stores and other households either can’t afford them or have traded down.

According to Friday morning’s report, Tiffany doesn’t see any signs of its earnings growth slowing down. The company hiked its full-year earnings forecast by 20 cents to $3.65-$3.75 per share – analysts expect $3.56 – and projects revenue to grow in the high teens on a percentage basis.

On the company’s conference call, Tiffany executives said third-quarter sales are trending above expectations and that the company is having success passing on higher costs for precious metals and gems to customers. A weaker dollar is also clearly benefiting the company, which said about half of its U.S. sales improvement in the second quarter came from tourist traffic, according to TradeTheNews.com.

To read the full Forbes blog post, click HERE.