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Tiffany gives upbeat 2012 forecast, shares up

By Phil Wahba

(Reuters) - Tiffany & Co said its business was back on track in the first quarter after a holiday scare, and the high-end jeweler forecast higher sales and profit for 2012, sending shares up nearly 7 percent.

A rebound in the U.S. stock market and easing in the debt crisis in Europe have helped business after the New York-based chain said in January that many customers had been "restrained" in their spending during the holiday season.

"That was the first warning that the luxury party was coming to an end, but now it seems it was just a speed bump," said Morningstar analyst Paul Swinand.

So far this quarter, which includes the Valentine's Day holiday, sales are "tracking in line" with the company's expectations, Chief Executive Michael Kowalski said in a statement. Valentine's Day is typically the third-biggest selling event for the jewelry industry.

For the fiscal year that ends next January, Tiffany expects global net sales to be up 10 percent, led by gains in Asia and the Americas. That would be an improvement over the soft holiday sales, but still below last year's 18 percent clip.

The company forecast a full-year profit of between $3.95 and $4.05 per share, above Wall Street estimates of $3.93, according to Thomson Reuters I/B/E/S.

Tiffany, which operates 247 stores worldwide, plans to add 24 stores this year - including new stores in Montreal, Salt Lake City and the SoHo district of Manhattan, and seven more in Asia.

The company said that much of its profit growth for the year will occur later in 2012, thanks partly to a jewelry tie-in with the upcoming "Great Gatsby" motion picture starring Leonardo DiCaprio.

Tiffany is also planning to carry 15 percent more inventory this year to support the chain's 175th anniversary.

Kowalski told analysts on a conference call that Tiffany was still gunning for long-term sales gains of 10 to 12 percent per year, and a 15 percent increase in annual earnings.

HELP FROM TOURISTS

Tiffany reported net income of $178.4 million, or $1.39 per share, for the fiscal fourth quarter ended January 31, down from $181.2 million, or $1.41 per share, a year earlier. That was below the $1.42 per share that Wall Street analysts were expecting.

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Sales increased 8 percent to $1.19 billion in the fourth quarter, in a marked slowdown from the pace of the first nine months of the fiscal year. Sales at stores open at least a year rose 5 percent.

European customers' anxiety about the debt crisis hurt business, with same-store sales falling 2 percent in that region, the only market to see a decline.

There was also some caution by shoppers in New York, where a drop in annual bonuses paid to Wall Street employees put a dent in high-end jewelry sales. Sales at Tiffany's iconic Fifth Avenue flagship rose by only 2 percent in the fourth quarter.

Things would have been worse without an influx of tourists to New York during the holiday season. Spending by foreign tourists accounted for some 40 percent of sales at Tiffany's Fifth Avenue store, which generated almost one-tenth of the company's total sales.

Other luxury retailers such as Saks Inc and Nordstrom Inc reported stronger holiday sales than Tiffany. High-end shoppers typically pull back on expensive jewelry before they start skimping on their wardrobes.

Some 25 percent of Tiffany's sales in Europe came from non-European customers, mitigating some of the 2 percent decline in the region's same-store sales.

Asia excluding Japan remained a major source of growth for Tiffany, with same-store sales up 13 percent. That market now accounts for almost one-fifth of overall sales.

In Japan, Tiffany's second-largest market after the United States, business continued to recover from the tsunami and nuclear disaster of a year ago, with same-store sales up 4 percent.

Tiffany shares were up 6.9 percent at $73.44 at midday on the New York Stock Exchange.

(Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn and Matthew Lewis)

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