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Tiffany's Holiday Sales 2011: Jewelry-Maker Says Holiday Sales Dropped Indicating Wealthy May Be Cutting Back

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NEW YORK — Jewelry retailer Tiffany & Co. said Tuesday that its sales growth weakened in the U.S. as shoppers pulled back on buying pricey baubles during the key holiday season.

The company known for its iconic turquoise box cut its yearly earnings guidance. Its shares fell more than 10 percent in morning trading.

The affluent have picked up spending since the Great Recession ended in mid-2009, recovering faster than other segments. Tiffany's results have reflected this, and quarterly results have beat expectations for the past five quarters. But analysts have wondered if this is sustainable, and Tiffany's holiday sales indicate that it may not be.

"After achieving very strong and better-than-expected sales and earnings growth in the first three quarters of 2011, sales weakened markedly in the United States and Europe during the holiday season, reflecting restrained spending by consumers for fine jewelry," said Tiffany CEO Michael Kowalski.

Total sales rose 7 percent to $952 million in November and December, helped by a 19 percent jump in the Asia-Pacific region and a 13 percent rise in Japan.

But in the U.S. growth was slower, with total revenue up 4 percent to $503 million and revenue in stores open at least one year up just 2 percent. The latter measure is considered a key gauge of a retailer's performance.

Tiffany did not break out how different categories fared, but one analyst suggested that slowing U.S. sales growth in the U.S. may be due to the middle-class "aspirational" shopper turning elsewhere as Tiffany's prices remain high.

"The upper middle-income consumer may have found another place to go. They're not buying $50,000 engagement rings, but they're looking for items for $350 to $1,000," said retail analyst Brian Sozzi of NBG Productions. "Those prices are increasingly harder to find at Tiffany, so consumers may be finding them at Macy's or Bloomingdales."

At Tiffany, higher sales to tourists in the U.S. were offset by weaker spending by U.S. customers, Kowalski said, and sales at its New York flagship store fell 1 percent.

Online and catalog sales were a particularly weak spot, down 4 percent from a year ago.

In Europe, revenue edged up 1 percent to $117 million and revenue in stores open at least one year fell 4 percent. The region has been a trouble spot for retailers, as Europeans are facing weaker economies than in the U.S.

Results for the two-month period show that Tiffany could fall short of its sales forecast for the three-month fourth quarter, which ends Jan. 31. It previously forecast revenue in stores open at least one year would rise in the mid- to high-single digit percentage range in the Americas, in the low single digit percentage range in Europe and about 20 percent in Asia-Pacific.

As a result, Tiffany trimmed its full year guidance. It now expects earnings for the fiscal year of between $3.60 and $3.65 per share, down in from guidance in November of $3.70 to $3.86 per share. Analysts expected earnings of $3.75 per share, according to FactSet.

Elsewhere in the jewelry sector, holiday sales results were better.

Zale Corp., which caters to more middle-income shoppers, reported revenue in stores open at least one year rose 5.9 percent during the holiday period, including a 10.1 percent rise in November and a 4.2 percent rise in December. Total revenue rose nearly 6 percent to $564 million. Irving, Texas-based Zale shares slipped 31 cents, or 9.3 percent, to close at $3.02 Tuesday.

At Signet Jewelers Ltd., which operates Kay Jewelers and Jared The Galleria of Jewelry in the U.S. and jewelry chains H. Samuel, Ernest Jones and others in the U.K., revenue from stores open at least one year rose 7.8 percent, including a 9.2 percent rise in the U.S. and a 1.8 percent rise in the U.K. Its shares fell $2.97, or 6.3 percent, to $44.05 Tuesday as investors fretted over weakness in Europe and Tiffany's results.

Tiffany shares fell $7, or 10.5 percent, to close at $59.94 Tuesday.

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