Tiffany & Company
) posted lower-than-expected first-quarter 2012 results. The
quarterly earnings of 64 cents a share missed the Zacks Consensus
Estimate of 69 cents, and dropped from 67 cents earned in the
prior-year quarter. The disappointing bottom-line result was a
reflection of dismal performance in the Americas region due to soft
demand for jewelry.
Despite registering a growth in the top line, the company
witnessed a drop in the bottom line due to a 10% rise in the cost
of sales and an 11% increase in selling, general and administrative
expenses. Given the weaker-than-expected results and sluggish
economic recovery in most of the countries, management trimmed its
fiscal 2012 outlook.
On a reported basis, including one-time items, earnings inched
up 1% to 64 cents a share from 63 cents delivered in the year-ago
period. The prior-year quarter earnings included headquarters
relocation costs of 4 cents.
Let's Unveil the Picture
Tiffany, which faces stiff competition from
Signet Jewelers Limited
), posted net sales of $819.2 million during the quarter, up 8%
from the prior-year quarter, on the heels of healthy performance of
stores in the Asia-Pacific and Japan regions, comparable-store
sales growth and new collection launches.
Total revenue came ahead of the Zacks Consensus Estimate of $818
million. Comparable-store sales climbed 4% in the quarter under
review. In constant currencies, net sales jumped 8% and comps grew
By geographic segment, sales in the Americas grew 3% to $386
million, whereas comps fell 1% during the quarter; sales in the
Asia-Pacific region surged 17% to $195 million and comps increased
11%; sales in Japan jumped 15% to $142 million and comps also grew
by 15%; and sales in Europe climbed 3% to $88 million but comps
dropped by 4%.
Other sales tumbled 14% to $9 million, reflecting a fall in the
wholesale sales of end goods to independent distributors.
Gross profit for the quarter jumped 6% to $469 million; however,
gross margin contracted 100 basis points to 57.3%.
Tiffany opened 4 outlets during the quarter. The company plans
to add 24 stores in fiscal 2012 with 9 in the Americas, 8 in
Asia-Pacific, 2 in Europe and 5 in the United Arab Emirates
(marking the commencement of operations in the region).
As of April 30, 2012, the company operated 251 stores (105 in
the Americas, 59 in Asia-Pacific, 55 in Japan and 32 in
Other Financial Details
Tiffany repurchased about 700,000 shares at $66.42 each,
aggregating $46 million during the quarter.
In January 2011, Tiffany announced a new share repurchase
program, overriding the previous program. The new program, which is
set to expire on January 31, 2013, authorizes the company to buy
back up to $400 million in shares. As of April 30, 2012, the
company has approximately $171 million at its disposal for future
Tiffany ended the quarter with cash and cash equivalents and
short-term investments of $343 million, and total short-term and
long-term debt of $834.4 million, reflecting 35% of shareholders'
equity compared with 30% in the prior-year. Capital expenditures
for the quarter were $44 million.
Tiffany recently raised its quarterly dividend by 10%. This is
time the company has hiked its dividend in the last 10 years. The
board approved an increase in annual dividend to $1.28 per share
(or 32 cents quarterly) from $1.16 (or 29 cents quarterly). The
increased dividend is slated to be paid on July 10, 2012, to
shareholders of record as of June 20.
Tiffany, a high-end jewelry designer, manufacturer and retailer,
lowered its fiscal 2012 guidance. The company now projects earnings
in the range of $3.70 to $3.80 per share, down from $3.95 to $4.05
The current Zacks Consensus Estimate for fiscal 2012 is $3.98
per share, falling short of management's guidance range.
Consequently, we could witness a correction in the Zacks Consensus
Estimates in the coming days, with analysts revising their
estimates to better align with the earnings outlook.
Tiffany now expects total net sales growth of 7% to 8% for
fiscal 2012, down from 10% predicted previously.
Management anticipates capital expenditures of approximately
$240 million for the year.
Zacks #3 Rank
Currently, Tiffany holds a Zacks #3 Rank, which translates into
a short-term Hold rating. Moreover, we have a long-term Neutral
recommendation on the stock.
SIGNET GRP PLC (SIG): Free Stock Analysis
TIFFANY & CO (TIF): Free Stock Analysis
ZALE CORP NEW (ZLC): Free Stock Analysis Report
To read this article on Zacks.com click here.