NEW YORK (AP) -- Tiffany & Co.'s blue box didn't sparkle for many shoppers this holiday season.
Shares of the luxury jewelry retailer are falling Thursday after the New York-based company announced that sales for the crucial holiday shopping season were lower than expected and muted its full-year earnings forecast. Meanwhile, lower-priced competitor Zale Corp. offered a more upbeat tone on holiday sales Thursday and said it expects to report its first annual profit since 2008.
The pair of reports comes two days after Signet Jewelers Ltd., the owner of the Kay Jewelers and Jared The Galleria of Jewelry chains, reported solid holiday sales in the U.S. , though business in the United Kingdom declined. It offered a fourth-quarter profit outlook in line with analysts' estimates. Shares of Signet were virtually unchanged, while Zale Corp.'s stock soared nearly 9 percent on Thursday.
Tiffany's business has seen a slowdown over the past year as it grapples with a global economic crisis. But some analysts believe that the company's problems go beyond that. They believe it is losing market share to Zale and Signet in jewelry priced under $500. Moreover, shoppers are increasingly looking to spend their $500 or so on other products like Apple iPads.
"I feel like the name Tiffany doesn't carry the same weight as it used to," said Brian Sozzi, chief equities analyst at NBG Productions. "There is a fundamental shift in the consumer mindset. Even if the economy were to roar back, there are more items competing with Tiffany. People are looking for more items that have function."
Sozzi noted that Tiffany should rethink its expansion plans as it figures out how to cater to a changing shopper.
Oliver Chen, an analyst at Citi Research, wrote in a note Thursday that Tiffany "needs to try to engineer high-quality and brand-appropriate products at lower price points in order to regain a customer who may not be able to afford the current offering."
Tiffany's worldwide sales totaled $992 million for the two months ended Dec. 31. That was up 4 percent compared with a year earlier. The company said that revenue at stores open at least a year was unchanged from the prior-year period. This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.
In the Americas, sales rose 3 percent to $516 million. Its flagship New York store posted a 2 percent drop in revenue at stores open at least a year, as did its branch stores. Tiffany said the results were relatively similar across most of the region. Online and catalog sales for the Americas climbed 4 percent.
Sales also rose slightly in Europe and fell 5 percent in Japan.
The New York company reported its biggest holiday sales gain in the Asia-Pacific region, where sales climbed 13 percent to $187 million. Revenue at stores open at least a year increased 7 percent.
Tiffany also said that other sales more than doubled mostly because in July five of its stores in the United Arab Emirates were converted from independently operated distribution to company-run stores.
Tiffany now foresees full-year earnings at the lower end of its previous outlook of $3.20 to $3.40 per share. Analysts polled by FactSet expect earnings of $3.29 per share. The company said that it is being conservative on its 2013 sales growth expectations due to uncertain economic conditions. It currently anticipates earnings will rise 6 percent to 9 percent.
Tiffany is to report final fourth-quarter results on March 22.
Meanwhile, Zale said that a key sales measure rose 2.3 percent during the critical holiday shopping season, and the jewelry chain still expects to post a profit this year. The company's fiscal year ends in July.
Total revenue was almost unchanged at $567 million in November and December, however, because the company has fewer stores than it did a year ago.
Zale said that revenue at its namesake brand jewelry and outlet stores open at least a year rose 3.1 percent during the holiday shopping season, while its U.S. fine jewelry brands posted a 2.2 percent increase.
Signet Jewelers Ltd. said Tuesday that its revenue at stores open at least a year rose 3.3 percent during the recent holiday season, boosted by higher demand at its U.S. Kay and Jared stores. The Bermuda-based jewelry retailer said it saw particularly strong demand in the days leading up to Christmas.
In a note earlier this week, Citi analyst Chen said that Signet's new products, improved customer service, investment in marketing and customer finance programs have paid off.
Tiffany's shares fell nearly 5 percent, or $3.05, to $60.23 in early morning trading Thursday, while Zale's stock soared nearly 9 percent, or 37 cents, to $4.56. Signet's shares slipped 50 cents to $59.51.