An increase in wholesale sales of diamonds helped Tiffany beat earnings estimates but same-store sales declined for the seventh straight quarter.
For the second quarter, the luxuty goods company on Thursday reported net income of $115 million, or 92 cents per share, on net sales of $959.7 million. Analysts had expected the company to earn 84 cents per share on revenue of $930.3 million.
But comparable store sales, a key retail metric, dropped 2%, compared to analysts’ estimates of a 1% decline. Only Japan saw an increase, while comp sales in North America, Tiffany’s largest market, fell 1% due to lower tourist spending and weak demand across categories other than fashion and designer jewelry.
“The results underscore the challenges that newly appointed chief executive Alessandro Bogliolo will face in turning around the company’s store sales when he starts in October,” The Financial Times said, adding that Tiffany “has been through a series of upheavals over the past year, as it struggles to revamp its brand to capture younger customers.”
In recent quarters, sales have been hit by weak tourist spending and the strong dollar, as well as the drop off in foot traffic at Tiffany’s flagship store on Fifth Avenue in New York.
But Tiffany managed a 3% net sales increase in the second quarter, reflecting in part higher wholesale diamond sales and new store openings. The company also cited increased wholesale sales in the Asia-Pacific region and strong e-commerce sales growth.
Gross margins rose to 62.3% from 61.9% in the year-ago period amid a shift in sales mix toward higher-margin jewelry.
“While net earnings rose in the first half, we remain determined to drive comparable store sales growth and stronger, sustainable earnings growth through a continued focus on product design innovation in jewelry and luxury accessories, further optimization of our store base, more impactful marketing communications and highly effective customer engagement both in-store and online,” Michael J. Kowalski, Tiffany’s chairman and interim CEO, said in a news release.
In trading Thursday, Tiffany’s shares were down more than 2% at $86.58.