Tiffany handily beat second-quarter earnings at $0.96 compared with our estimate of $0.84 and the Street at $0.85 with the upside entirely from gross margin while sales grew a healthy 7% (comps 3%). Guidance was raised by half the magnitude of the beat given softness in Europe and Japan, along with uncertain global macro conditions. We are encouraged by solid results in the Americas and Asia-Pacific and the improvement in fashion jewelry following a period of prolonged weakness.
Furthermore, we see the potential for new jewelry collections, which will be supported by increased marketing, to support sales in the second half. We believe guidance will likely prove conservative— more on gross margin if fashion jewelry rebounds, and to a lesser extent on sales with the potential for improved trends from the newer jewelry collections, partly offset by Europe and Japan. With a valuation of 23.5 times our revised above-guidance 2014 estimate (16.6% growth) and 20.6 times our revised 2015 estimate (13.9% growth), we believe the shares are already pricing in a healthy dose of optimism as Tiffany evolves to more of a fashion than occasion brand. We are not inclined to chase at these levels despite our positive long-term view on the name.
Fashion jewelry grew in line with total company sales with strength in gold and higher-end silver, partly offset by weakness in lower-price silver (total silver sales were unchanged). The company is passing through price increases across categories and most regions with average price up in nicely Americas and Asia-Pacific. The Tiffany T collection (from new design director Francesca Amfitheatrof) launched last week. Featuring 50 styles, the collection will span a range of materials and price points (from a few hundred dollars to $20,000). Tiffany is stepping up marketing investment mostly in the third quarter around the new product launches to build awareness (marketing up double digits in the second half versus flat in the first half).
This was the third consecutive quarter of sales improvement in the Americas, driven by new products, marketing, new selling initiatives, foreign tourist spending, and favorable market conditions. While comps in Asia-Pacific slowed sequentially, the two-year trend improved and was a relative highlight considering what we have heard from other retailers in the region. Japan sales were less negative each month but not yet positive through the first few weeks of August following a tax increase. Europe softened with particular weakness in the United Kingdom; some of that spending is shifting to U.S. sales to foreign tourists.