Market Scan

Tiffany's Shares Don't Shine

Tiffany’s shiny quarter didn’t satisfy investors who pulled down shares of the luxury retailer.

By early-afternoon Friday, shares of the New York-based company were down 2.4%, or $1.16 cents, to $47.59.

For the third quarter, which ended on Oct. 31, Tiffany & Co. (nyse: TIF - news - people )’s sales increased 18.0% to $627.3 million from the $531.8 million reported during last year’s corresponding period.

Based on generally accepted accounting principals, earnings rose 239.9% to $98.9 million, or 71 cents per share, from $29.1 million, or 21 cents per share, posted last year.

Although impressive at first glace, Tiffany’s results include the sale-leaseback of its flagship store in Tokyo, which contributed 48 cents to the per share total. When excluding charges and gains, the company’s earnings were 27 cents per share.

According to Thomson Financial, Wall Street had anticipated $616.2 million in sales with earnings of 25 cents per share, but by the time of publication had not received a majority consensus on what figures those predictions were based.

On a same-store basis, the jeweler enjoyed a 8% sales increase in the United States, along with a 23% rise in Europe, and, excluding Japan, a 34% jump in Asia.

“I thought it was a very good quarter, especially given on what we’re seeing on a macro level with the economic slowdown,” said JMP Securities analyst Kristine Koerber. “Clearly the high-end consumer is showing resilience and I expect that to continue through the holiday period.”

Of note, sales in the New York flagship store increased 25% during the quarter due to higher sales to local customers and foreign tourists, while comparable branch store sales increased 4%.

Wall Street gave Tiffany special attention as investors anxiously look for any piece of information and insight into the behavior of luxury consumers during the holidays.

With one month over into the all-important November-December season, Tiffany Chief Executive Michael Kowalski said he was “pleased” with overall sales growth as it meets company expectations.

Tiffany lifted its 2007 outlook to between $2.25 and $2.30 per share, excluding charges and gains, from its prior guidance of $2.22 to $2.27 per share.

Despite the good news, Koerber speculated that Friday’s drop in share price could be because the company’s increased guidance was only inline with Wall Street’s “aggressive” expectations. She also conjectured that the drop was the result uncertainty surrounding the performance of its branch-stores in the U.S.