Earnings Preview: Tiffany

NEW YORK—Tiffany & Co. reports earnings for the second quarter on Thursday before the market open. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The jewelry retailer, whose blue box has become synonymous with luxury, has been looking abroad to offset weakness in the U.S. caused by a slowing economy. Americans are cutting back on big-ticket purchases, and Tiffany is hoping that international sales will help offset this softness.

In 2007, the U.S. represented about 59 percent of Tiffany's total revenue. Japan represented 17 percent, other Asia-Pacific was 11 percent, and Europe generated about 8 percent of total sales.

During the first quarter, strong growth in the Asia-Pacific and European markets lifted profit 19 percent, but the company warned that its U.S. business was unlikely to improve until later in the year. U.S. same-store sales, or sales at stores open at least a year, were flat during the period.

Last month, Tiffany & Co. lost a lawsuit filed against eBay Inc., in which Tiffany alleged most items listed on eBay as genuine Tiffany products were fakes. Tiffany filed an appeal to the ruling earlier this month.

EXPECTATIONS: Analysts polled by Thomson Reuters expect earnings of 54 cents per share and sales of $719.9 million.

ANALYST TAKE: Marie Driscoll, a retail analyst with Standard & Poor's Equity Research, expects sales to rise 10 percent and profit to grow year-over-year.

She thinks international sales in European countries will boost revenue growth and help mitigate weak sales in the U.S. and Japan.

Driscoll also suspects the company's New York flagship store benefited from international tourism buoyed by the strong euro. In the year ended January 31, the New York flagship store represented about 10 percent of total sales, according to Tiffany's.

Driscoll also said sales of non-jewelry items, such as watches and sunglasses, may also mitigate weakness in the luxury goods sector.

WHAT'S AHEAD: Rising diamond prices and softening U.S. discretionary spending have some analysts wondering what the holiday season holds in store for jewelers, as many Americans tend to purchase big-ticket items like jewelry and engagement rings during the last month of the year.

STOCK PERFORMANCE: So far this year, shares of Tiffany have declined 13.2 percent. During the quarter, the stock declined 2.6 percent.