Tiffany Profits Up; Cautious About Future

Tiffany & Co. reported this week that its worldwide net sales rose 9% in the second quarter due to solid sales growth. The company said that its cost cutting strategy contributed to a 19% jump in profits during the quarter. Also this week, Tiffany increased its full-year earnings growth outlook.

Michael J. Kowalski, Chairman and Chief Executive Officer, said "Tiffany's financial performance in the quarter continued to demonstrate the benefits derived from a growing global presence, with roughly half of our sales now occurring outside the U.S. In the quarter, we were pleased that sales increased in most countries and product categories."

The company attributed much of the sales growth to rising European and International sales. Worldwide Tiffany sales were 15% higher than for the same quarter of the prior year. During the quarter, the Company opened new stores in Singapore and Shanghai.

Despite the strong quarterly results, Tiffany said that it looks toward the end of the year with "guarded optimism." The company is continuing to cut costs with the expectation that earnings growth will be somewhat restrained in the third-quarter. Nevertheless, Tiffany says that it remains "strategically and financially well positioned" for the future.

Tiffany & Co. (TIF) ended the week up at $18.40.

J Crew Reports Rising Revenues

J Crew reported rising revenues this week for the company's second-quarter. The upscale clothing retail chain that appeals to middle class consumers said that its revenues increased by 14% to $407.5 million with J Crew in-store sales also increasing by 14%.

The company said that its rising revenues were fueled by increased sales from catalogue orders made over the phone and purchases made over the Internet. Direct sales (Internet and phone sales) increased by 16% for the quarter.

Millard Drexler, J Crew's Chairman and CEO, stated, "While we are really pleased with the second quarter, it is more critical than ever to continue to move forward and invest in our business for quality, long term, earnings growth. It's about moving, doing, creating - it never stops."

Analysts say that although J Crew's sales were higher for the quarter, they failed to meet the market's expectations. Middle-class consumers are concerned about the economy and this could mean lower spending and lower future sales for retailers. In recognition of this, J Crew revised its earnings guidance down from earlier estimates for its next quarter.

J Crew (JCG) ended the week up at $42.91.

Intel Says Third-Quarter Below Expectations

Intel Corporation announced this week that the company's third-quarter revenue will be below its previous outlook. Intel now expects third-quarter revenue to be approximately $11 billion compared to the previous expectation of between $11.2 and $12.0 billion.

Intel said that its revenue is being affected by weaker-than-expected demand for consumer PCs in mature markets. The company also said that it is holding inventories inline with the revised expectations. Intel anticipates lower-than-expected profits this quarter. However, the company expects that its enterprise systems will sell at a higher than average selling price that will partially offset the impact of lower PC sales.

Intel announced last week that it is purchasing security software company McAfee. The company said that it does not anticipate that this acquisition will impact earnings. Intel will update fourth-quarter and full-year expectations with its third-quarter earnings report on Oct. 12.

Intel Corp. (INTC) ended the week up at $18.40.

The Dow started the week at 10,303 and ended at 10,151. The S&P 500 started the week at 1,079 and ended at 1,065. The NASDAQ started the week at 2,174 and finished at 2,154.

Treasuries Fall on Bernanke's Remarks and GDP

Treasuries fell this week on Fed Chairman Ben Bernanke's promise to add economic stimulus as necessary to assist the ailing U.S. economy. In a speech before central bankers in Jackson Hole, Wyoming, Bernanke gave an analysis on the economy and economic growth over the past year.

In response to comments that U.S. economic growth has been "too slow" while unemployment has been "too high," Bernanke stated, "The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly."

Treasuries fell just before the Fed Chairman's speech on a disappointing U.S. GDP report. The report suggested that the economy, as measured by gross domestic product (the value of goods and services produced); is not improving as quickly as economists anticipated. U.S. GDP was revised to 1.6% for the months of April through June from an earlier estimate of 2.4%. However, the Wall Street Journal noted that the three-month GDP number was higher than economists had estimated.

The 15-year Treasury note yield began at 2.67% and finished at 2.64%. The 30-year Treasury note yield began at 3.85% and finished at 3.69%.

Mortgage Rates Fall for Ninth Week out of Ten

Freddie Mac reported mortgage rates falling again this week for the ninth out of ten weeks in a row. The 30-year fixed-rate mortgage (FRM) averaged 4.36% for the week ending August 26, 2010, down from last week when it averaged 4.42%. Last year at this time, the 30-year FRM averaged 5.14%. The 15-year FRM this week averaged a record low of 3.86%, down from last week when it averaged 3.90%. One year ago at this time, the 15-year FRM averaged 4.58%.

Amy Crews Cutts, Deputy Chief Economist for Freddie Mac, said, "Existing home sales plunged 27% in July, while new homes fell 12% to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery. As a result, long-term bond yields fell to the lowest levels since January 2009, allowing fixed mortgage rates to ease to new record lows this week."

Crews Cutts explained that much of the slowdown in sales was expected due to the recently expired homebuyer tax programs, which resulted in a greater number of home purchases in the first half of the year. Home sales over the first seven months of 2010 were nearly 8% higher than over the same period one year ago.

The money market fund finished this week at 0.73%. The 1-year CD finished at 1.09%.

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