Tiffany, Zale Stocks Rise; Holiday Spree Seen

Jewelers are positive that upper and middle income shoppers would indulge during the long holiday season despite signs of growing economic weakness.

Jeweler’s Optimism

The optimism showed at the stock market as US jeweler giant Tiffany & Co. registered strong profit Thursday, buoyed by robust foreign sales.  Company officials responded by raising sales forecast for the year as it expects better performance of the jewelry market for the fourth quarter.

On the other hand, Zale Corporation expects to gain profit for the rest of the year and reported significantly lower losses, beating expectations from the Wall Street.  Zale officials said that they will now focus on new product offering rather than on giving discounts for shoppers.  They see product development as the key to attract more buyers to come to their stores during the holiday season.

At the end of trading, shares of Tiffany & Co. went up by 11 percent while it rival, Zale Corp. garnered more than 20 percent increase.

Domestic sales of Tiffany’s have been hit by consumer’s decision to skip luxury goods.  Its sales however for the upper class market did not reflect the current economic crunch as more affluent customers still buy their products.  

This is not the case for smaller jewelry industry players such as Zale, Finlay Enterprise, and Signet Group.  The economic slow down was felt by these jewelry companies as consumers cutback on expenses, adversely affecting their sales performance.

Market Analysts are Skeptical

Market analysts on the other hand do not share the optimism of Tiffany’s.  They added however that Tiffany could ride on holiday spending better than Zale Corp.  Gary Giblen of Goldsmith and Harris said that Tiffany could reach its projections provided they offer the right products for their high-end customers.  Giblen added that rivals such as Zale which cater to middle income Americans could suffer as the middle class is spending more on food, which is getting scarce nowadays.

Stephanie Hoff, a market analyst of Edward Jones, is skeptical about the projected same-store sales of Tiffany in the fourth quarter.  Hoff said that the domestic market is still reeling from the crisis.  Hoff wished that Tiffany should not become too optimistic in their projections for the fourth quarter.

Tiffany’s profit from sales for the second quarter rose to $80.8 million or 63 cents per share.   This is beyond market expectations of 55 cents per share.  The gross sale of Tiffany was up by 11 percent reflecting a huge $732.4 million. Overall sales in the American continent went up by 3 percent but its US based operation experienced a shortfall of 4 percent reduction in sales.

Tiffany performed strongly in Europe as it reported an 11 percent rise in sales.  The Asia-pacific region provided Tiffany a 1 percent sales increase.  Company officials are optimistic that they can increase their global sales to 9 percent, leaning on stronger sales from customers Europe and Asia.