Tiffany & Company (TIF - Analyst Report) came out with third-quarter fiscal 2014 results, wherein earnings of 76 cents a share missed the Zacks Consensus Estimate by a penny. The company generated net sales of $959.6 million that also fell short of the Zacks Consensus Estimate of $970 million due to sluggish demand in Japan. However, this Zacks Rank #3 (Hold) stock maintained its earnings forecast for fiscal 2014.

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The bottom line jumped 4.1% from 73 cents a share earned in the year-ago quarter, alleviating investors’ concern to some extent. A 5.3% increase in sales and an improved gross margin supported the bottom line. Sales growth across the Americas and Europe drove the top line. In constant currencies, net sales jumped 7%, whereas comparable-store sales (comps) climbed 4%.

Shares of this jewelry retailer rose roughly 4% during the pre-market trading session.

By geographic segments, sales in the Americas grew 10% to $459 million, while comps rose by an equivalent percentage. Sales in the Asia-Pacific region climbed 2% to $243 million but comps declined 3%. Japan sales dropped 12% to $113 million and comps fell 13% and sales in Europe jumped 9% to $114 million but comps remained flat. Other region sales surged 28% to $30 million whereas comps grew 35%.

In constant currencies, sales in the Americas rose 11%, while comps grew by a similar percentage rate during the quarter. Sales in the Asia-Pacific region grew 2% but comps declined 3%. Sales in Japan fell 5%, while comps decreased by 6%. Europe sales surged 10%, whereas comps increased 2%.

Gross profit for the quarter increased 9.9% to $570.9 million, while gross margin expanded 250 basis points to 59.5% due to lower product cost, increase in prices and a profitable sales mix. Operating income jumped 9.7% to $168.5 million, while operating margin increased 70 basis points to 17.6%. The margin improvement was driven by higher gross margin.

Store Update

Tiffany opened a freestanding outlet in Tokyo during the quarter. As of Oct 31, 2014, the company operated 294 stores (122 in the Americas, 72 in Asia-Pacific, 56 in Japan, 38 in Europe, 5 in the U.A.E. and 1 in Russia).

The company in fiscal 2014 plans to open 10 stores — four in the Americas, two in the Asia-Pacific, two in Japan, and one each in Europe and Russia. It also intends to shut down 2 stores — one each in the Americas and the Asia-Pacific.

Other Financial Details

Tiffany ended the quarter with cash and cash equivalents and short-term investments of $383.4 million, and total short-term and long-term debt of $1,086.4 million, reflecting 37% of shareholders equity. Capital expenditures of $153 million were incurred in the first-nine months of fiscal 2014. Management projects capital expenditure of $250 million and expects to generate free cash flow of at least $400 million in fiscal 2014.

Tiffany bought back 63,000 shares worth $5.8 million in the quarter. In March 2014, the company’s board of directors authorized a share repurchase program of $300 million, which is slated to expire in March 2017. As of Oct 31, the company had $278 million at its disposal under the share repurchase authorization.

Guidance

Tiffany reaffirmed its fiscal 2014 earnings forecast of $4.20 to $4.30 per share. The current Zacks Consensus Estimate for the fiscal year is $4.33 per share. Management now projects net sales growth in a mid-to-high single-digit percentage for the fiscal year.

Other Stocks Worth Considering

Better-ranked retail stocks include American Eagle Outfitters, Inc. (AEO - Analyst Report), Foot Locker, Inc. (FL - Snapshot Report) and L Brands, Inc. (LB - Analyst Report), all carrying a Zacks Rank #2 (Buy).