In the current economy, jeweler Tiffany (TIF) is having a gala time. Its recent quarter gave investors reason to celebrate the holiday season. Tiffany's third quarter numbers were ahead of the Street's expectations, which sent the stock price north.

Analyzing the key drivers
Driven by increased demand for Tiffany's products, revenue surged 7% over last year to $911.5 million. Yellow diamonds and the new atlas collection were some of the reasons why consumers were attracted to the retailer. Moreover, the company introduced new designs which lured people to shop.

Going by geographic regions, the Asian region did well, posting sales growth of 22% over last year's quarter. Key region China experienced intense demand for Tiffany's jewelry. Chinese shoppers' growing attraction to diamonds led to higher revenue.

Moreover, the retailer opened six new outlets during the quarter, which added to its top line. Tiffany's gross margin also expanded since the company benefited from higher product prices and lower costs of gold, diamonds, and silver.

Outpacing peers
Tiffany posted a great quarter despite weak customer confidence in the U.S. In fact, peers Signet Jewelers (SIG 2.12%) and Zale (NYSE: ZLC) were unable to outshine the retailer, as reflected by their quarterly numbers.

Signet Jewelers' third-quarter results were mixed. Although its revenue jumped 7.7% to $771.4 million, its earnings dropped 3.7% since the company could not manage its costs well. Signet's same-store sales grew 3.2%, whereas Tiffany's same store sales grew by a whopping 7%. However, Signet has been trying to overcome competition by growing its business through acquisitions. It acquired Ultra Stores last year, which benefited the company by expanding its presence in the outlet business. In fact, Signet has also acquired a diamond-polishing factory, which will expand its diamond business.

Zale is mainly based in the United States, and has been performing well. Although its revenue inched up only 1.4%, its comparable store sales grew 4.4%. In fact, the company also managed its costs well which led to an expansion of 20 basis points in its gross margin. Zale has done better at attracting customers in the U.S. than Tiffany. Tiffany's same-store sales in America rose by a meager 1%, which shows that the company is finding it comparatively difficult to lure U.S. shoppers to its stores. Shoppers are probably turning to a smaller retailer such as Zale Corporation for their jewelry needs.

Great future
Although Tiffany has not been able to do very well in the U.S., its presence in other regions has enabled it to outperform its peers. The retailer has also been launching new products, which have attracted interest from customers. Also, Tiffany offers great variety in the silver jewelry segment, which has worked well for the company. Along with introducing new silver items, Tiffany hired a new designer to design its jewelry. This will improve the retailer's collection, leading to higher sales.

Also, the company raised its earnings outlook from $3.50-$3.60 per share to a range of $3.65-$3.75 per share for fiscal 2013. Revenue is expected to be higher as well, as the jeweler plans to open 14 new stores during the fiscal year.

The takeaway
Tiffany has been able to drive sales north by offering a new collection, launching new products, and introducing new designs. The company's colorful diamond collection has also been much in vogue, attracting shoppers' attention. Moreover, the retailer has been expanding its presence, managing its costs well, and outperforming its competitors. Hence, Tiffany has been active on all fronts and it should prove to be one of the most rewarding investments for your portfolio.