Tiffany & Co (TIF.N), which this week delayed the close of its $16.2 billion sale to France’s LVMH (LVMH.PA), on Thursday reported a stronger-than-expected quarterly profit and signaled an uptick in sales due to a recovery in China and online demand.
The U.S. jeweler said worldwide sales in August so far were slightly higher than a year earlier, as the rebound in second-quarter revenues in China extended into the current quarter.
“Increased sales in mainland China and global e-commerce accelerated during the second quarter and propelled our return to quarterly profitability,” Chief Executive Alessandro Bogliolo said in a statement.
Retail sales in mainland China began to improve in April and picked up momentum in May, during which they increased about 90%, Tiffany said.
“Q2 results lead us to believe that Tiffany is well-positioned to participate in China’s luxury rebound, which is seeing a substitution effect to domestic demand on travel restrictions and is better positioned for a V-shaped recovery than the U.S.,” said CFRA analyst Camilla Yanushevsky.
Excluding items, the company earned 32 cents per share compared to analysts’ average estimate of 19 cents, according to IBES Refinitiv data.
Earlier this week Tiffany and LVMH, the world’s largest luxury group, pushed back by three months the deadline to complete their tie-up as they sought regulatory approvals delayed by the pandemic.
LVMH agreed last year to buy Tiffany in its biggest ever acquisition, betting it could restore the U.S. jeweler’s luster by investing in spruced-up stores and new collections.
Tiffany also said on Thursday it had enough cash on hand to support the company’s liquidity and capital requirements for the foreseeable future, and that it was in compliance with all debt covenants as of July 31.
“Merger is all that matters … China strength coupled with ROW (rest of the world) improvement and covenant compliance shows things are moving in the right direction here for the deal with LVMH,” Jefferies analyst Randal Konik said.
Globally the retailer’s e-commerce business was up 123%, with key markets such as the United States and the United Kingdom up 122% and 93%, respectively, during the second quarter.
This surge in online sales helped Tiffany offset some of the major losses incurred when it was forced to shut the bulk of its 300 stores across the globe for months to curb the spread of the virus.
Based in New York and best known for its diamond engagement rings, Tiffany faces further headwinds as the health emergency has plunged major economies into recession and brought international tourism to a screeching halt.
Tiffany’s net earnings fell to $31.9 million in the three months ended July 31, from $136.3 million a year earlier.
Worldwide sales fell 29% to $747.1 million, missing expectations of $772 million.
The company’s shares were up 1.7% in premarket trade.