Tiffany earnings top estimates even as revenue falls, hurt by Hong Kong unrest

Tiffany on Wednesday reported quarterly earnings that easily topped analysts’ expectations, but revenue fell short as protests in Hong Kong disrupted the luxury jeweler’s sales, and tourists spent less across the U.S.

It also maintained its previously lowered outlook for the full year.

Its shares dropped nearly 2% in premarket trading after initially jumping more than 5% on the news.

Here’s how Tiffany did for its fiscal second quarter ended July 31 compared with what analysts were expecting, based on Refinitiv data:

• Earnings per share: $1.12 vs. $1.04 expected
• Revenue: $1.05 billion vs. $1.06 billion expected
• Global same-store sales: down 4% vs. a drop of 1.3% expected

“With the tough comparison to last year’s strong performance in the first half behind us, and in spite of the headwinds of weak demand from foreign tourists, currency exchange rate pressures and continuing business disruptions in Hong Kong, we are actively managing what is in our control and positioning our brand to win,” CEO Alessandro Bogliolo said in a statement.

Ongoing and months-long protests in Hong Kong have crippled the Asian financial center and ignited investor concerns. A wider pro-democracy movement has escalated more recently, with some people there demanding full autonomy from Beijing.

Tiffany’s net income for the quarter dropped to $136.3 million, or $1.12 a share, compared with $144.7 million, or $1.17 per share, a year earlier. That was better than expectations for $1.04, based on Refinitiv data.

Sales fell to $1.05 billion from $1.08 billion a year ago, short of expectations for $1.06 billion.

Sales at stores worldwide operating for at least 12 months were down 4%. Excluding the impacts from currency exchange rates, they were down 3% during the quarter, the company said. That was worse than an expected drop of 1.3%.

Tiffany said same-store sales in the U.S. were down 4% on a constant-currency basis, while analysts had been calling for a drop of 1.7%. In the Asia-Pacific region, same-stores sales were up 1%, better than an expected drop of 0.2%. Tiffany said it had “strong growth” in mainland China but “softness” in Hong Kong.

Tiffany stock, valued at $10.1 billion as of Tuesday’s market close, has dropped more than 35% over the past 12 months.

Earlier this year, Tiffany trimmed its full-year outlook, citing the impact it will face due to increased tariffs. It also has blamed a strong U.S. dollar and lower spending by tourists as hampering recent results. Its largest market, the Americas, has seen continued sales declines, despite Tiffany’s efforts to sell more directly to consumers and to revamp its flagship Fifth Avenue shop in Manhattan.

Other retailers including Macy’s and Coach owner Tapestry have also taken a hit because of weaker tourism spending. Tiffany has said tourism makes up roughly 12% of sales in the Americas.

For its fiscal year ending Jan. 31, 2020, Tiffany is still calling for net sales globally to increase by a low-single-digit percentage, and for net earnings per share to increase by a low-to-mid-single-digit percentage.