Tiffany & Co. has surpassed profit expectations and showed signs of recovery in its business following the impact of the COVID-19 pandemic. The luxury jeweler reported an increase in sales, attributing it to the rebound in China and a surge in online demand. In August, global sales were slightly higher compared to the same period last year, as the strong revenues from the second quarter in China extended into the current quarter.

The retail sales improvement in mainland China began in April and gained momentum in May, with a significant increase of approximately 90%, according to Tiffany. Analysts believe that Tiffany is well-positioned to benefit from China’s luxury rebound, as domestic demand increases due to travel restrictions. Alessandro Bogliolo, the company’s CEO, stated that the increased sales in mainland China and global e-commerce during the second quarter played a significant role in their return to profitability.

Tiffany reported earnings per share, excluding items, of 32 cents, surpassing analysts’ average estimate of 19 cents. This positive performance follows the news that the company has delayed the closing of its $16.2 billion sale to LVMH, the world’s largest luxury group. The merger between the two companies has been postponed by three months due to pandemic-related regulatory approvals disruptions. LVMH had previously agreed to acquire Tiffany last year, aiming to rejuvenate the jeweler’s brand through store renovations and new collections.

Despite the challenges posed by the pandemic, Tiffany expressed confidence in its liquidity and capital requirements, stating that it has sufficient cash on hand to support its operations in the foreseeable future. The company also highlighted its compliance with all debt covenants as of July 31. Analysts view the improved situation in China and the company’s adherence to debt agreements as positive indicators for the completion of the deal with LVMH.

Tiffany’s e-commerce business witnessed a surge in global sales, with a growth rate of 123%. Key markets like the United States and the United Kingdom experienced increases of 122% and 93% respectively during the second quarter. These online sales helped offset the significant losses incurred when Tiffany was forced to close the majority of its stores worldwide for months to prevent the spread of the virus. However, the company still faces challenges as the pandemic has resulted in recessions in major economies and a halt in international tourism.

In the three months ending on July 31, Tiffany’s net earnings declined to $31.9 million, compared to $136.3 million in the same period last year. Worldwide sales also fell by 29% to $747.1 million, missing expectations. Despite this decline, the company’s shares rose by 1.7% in premarket trade.

Useful links:
Reuters: Tiffany & Co. tops quarterly profit target
CNBC: Tiffany tops Q2 2020 earnings estimates, raises outlook