Upscale jeweler Tiffany & Co (TIF) reported an unexpected rise in second-quarter profit as margins got a boost from lower product input costs, changes in product sales mix and price increases.
The company’s shares rose 4.5% to $72 in premarket trading on Thursday.
Tiffany’s net income rose to $105.7 million, or 84 cents per share, in the quarter ended July 31 from $104.9 million, or 81 cents per share, a year earlier.
Analysts on average had expected profit to drop to $89.8 million, or 72 cents per share, according to Thomson Reuters I/B/E/S.
The company’s selling, general and administrative costs fell 4.3% to $402.2 million in the quarter. Gross margin increased to 61.9%, from 59.9%.
Tiffany’s profitability for the rest of the year will likely get a boost from the recent drop in prices of precious metals such as silver, gold and platinum, Edward Jones analyst Brian Yarbrough wrote in a pre-earnings note.
However, Tiffany, known for its 130-year old “Tiffany Setting” diamond engagement ring, has been struggling with declining sales due to lower tourist traffic and as a strong dollar erodes the value of revenue from outside the U.S.
Tiffany’s sales at stores open for more than a year fell 8% in the latest quarter, dropping for the seventh straight quarter.
Analysts on average were expecting a decline of 6.90%, according to research firm Consensus Metrix.
Tiffany’s total net sales fell 5.9% to $931.6 million, while analysts were expecting $934.74 million.
“The global environment continues to reflect well known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists, especially from China,” chief executive Frederic Cumenal said in a statement.
The company said sales were lower in continental Europe due to weak demand by foreign tourists and local customers, in contrast to better performance in the U.K.