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Report on Business Tiffany shares rebound as luxury retailer sticks to 2019 forecasts

In this Nov. 29, 2018, file photo, a woman walks past a Tiffany & Co. store at a shopping mall in Beijing.

Mark Schiefelbein/The Associated Press

Luxury retailer Tiffany & Co. said Friday it expected earnings growth to resume in the second half of the year, helped by a healthy e-commerce business, a forecast that allowed investors to look past slightly disappointing quarterly sales.

The New York-based company also stuck to its fiscal 2019 revenue and profit targets, and its shares were up 3.6 per cent in afternoon trade. They earlier fell as much as 5 per cent when investors initially reacted to quarterly sales that narrowly missed Wall Street estimates.

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. Two months ago, Tiffany had warned of soft demand in the holiday season because of low spending by Chinese tourists and weakness in Europe and at home.

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“We have done a lot, a lot of new things, also things where we had made some mistakes, we are learning, and we are addressing it,” chief executive officer Alessandro Bogliolo said on a post-earnings call, adding he would have “started a holiday campaign three weeks earlier.”

The jeweller has refreshed its collections with more affordable items such as pendants and earrings to appeal to millennials who gravitate to lower-priced competitors such as Denmark’s Pandora A/S and Signet Jewelers Ltd.

The retailer said its e-commerce business grew roughly twice the rate of its overall business. Later this year, Tiffany plans to launch an e-commerce enabled website in China to cater to the fast-growing market.

Mr. Bogliolo told Reuters on Friday he expects the company’s percentage of total sales that are online, currently at 7 per cent, to grow.

“I’m really confident that we will reach 10 per cent, maybe even 15 per cent one day,” he said. “But I don’t see that as a cannibalization of brick-and-mortar.”

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

The company also said it is taking steps to control the volatility surrounding tourist spending by investing in its domestic customers.

For instance, strong marketing campaigns surrounding new and improved product assortments and increasingly digital in-store experiences will help earnings growth resume in the second half of the year, the company said.

The company 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 per cent as demand for engagement and designer jewellery 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 per cent.

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

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

“Despite some softer top-line performance and better-than-expected cost control, we would categorize the release as generally clearing low expectations,” William Blair analyst Dylan Carden wrote in a note.

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