Investors have been used to seeing mixed results from Tiffany (NYSE:TIF) lately. The luxury jewelry specialist reported slowing growth in each of the last two quarters -- while still setting a new revenue record in fiscal 2018.

This week, the company announced first-quarter metrics that didn't do much to change the broader demand picture. Management reiterated their modest 2019 outlook but warned investors not to expect a return to sales growth until the second half of the year.

More on that forecast in a moment. First, here's how Tiffany's first-quarter results stacked up against the prior-year period:

 Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$1 billion

$1.03 billion

(3%)

Net income

$125 million

$142 million

(12%)

Earnings per share

$1.03

$1.14

(10%)

Data source: Tiffany's financial filings. 

What happened this quarter?

Sales performances varied across Tiffany's geographic selling markets, with overall results flat after accounting for currency exchange shifts. Profitability worsened, too, as the company dealt with the twin challenges of soft demand and rising expenses.

A woman wearing diamond jewelry.

Image source: Getty Images.

Here are some of the key highlights from the quarter:

  • Comparable-store sales fell 4% in the U.S., held steady in Japan, and rose in Europe and in China. The broader flat result constitutes a slight improvement over last quarter when comparable-store sales dropped 1%.
  • Gross profit margin declined after rising for more than a year. The metric worsened to 62% of sales from 63% a year ago due to rising input costs and the weakening sales base.
  • Selling expenses outgrew revenue again, but the expansion was more modest than investors have seen in recent quarters. After shooting higher by 15% last quarter, expenses rose by just 3% in the first quarter. Still, the combination of higher spending and lower gross profit meant that operating earnings fell to $161 million, or 16% of sales, from $204 million, or 20% of sales.
  • Inventories rose 6% to outpace revenue growth, suggesting the company might see pricing pressures as it works through excess jewelry product.

What management had to say

Executives said the weak sales result roughly met their expectations considering their late-March prediction of soft revenue at the start of the year. Still, CEO Alessandro Bogliolo and his team noted that Tiffany experienced "dramatically lower worldwide spending attributed to foreign tourists." Slumping demand from Chinese visitors to world capitals has hurt the growth picture, and that trend shows no signs of letting up.

On the bright side, executives were happy to see sales within China increase on top of a strong prior-year period. "We believe this growth in sales to local customers reflects progress in executing our strategic priorities," Bogliolo said.

Looking forward

Tiffany's China growth could hit a snag now that jewelry imports into the country are subject to a punishing 25% tariff rate. Investors will want to keep a close eye on demand trends in that country for signs that executives can minimize the disruption from that price hike.

However, management left all the key elements of its 2019 outlook in place. Specifically, the chain is calling for sales growth to slow to around 3% from last year's 6% increase and for operating margin to hold steady or increase marginally.

In another sign of executives' confidence in the business, Tiffany raised the annual dividend payment by 5% to $2.32 per year. Bogliolo and his team continue to expect sales to drop in the fiscal second quarter before rebounding significantly in the back half of the year.