Tiffany & Company
) posted lower-than-expected third-quarter 2012 results. The
quarterly earnings of 49 cents a share missed the Zacks Consensus
Estimate of 63 cents, and dropped sharply from 70 cents earned in
the prior-year quarter. The disappointing result was a due to
shriveled gross margin and higher tax rate, apart from difficult
Given the weaker-than-expected results and sluggish economic
recovery in most of the countries, management trimmed its fiscal
2012 outlook. Shares of Tiffany dropped 8.4% to $58.40 during
pre-market trading hours.
Let s Unveil the Picture
Tiffany, which face stiff competition from
Signet Jewelers Limited
), posted net sales of $852.7 million during the quarter, up 4%
from the prior-year quarter, on the heels of healthy performance
of stores in the Americas, Asia-Pacific and Europe regions and
new collection launches. However, total revenue fell short of the
Zacks Consensus Estimate of $858 million. In constant currencies,
net sales jumped 5%, whereas comparable-store sales inched up
By geographic segment, sales in the Americas grew 3% to $400
million, whereas comps remained flat during the quarter; sales in
the Asia-Pacific region climbed 2% to $188 million but comps
dropped 3%; sales in Japan were rose marginally to $147 million
and comps rose 2%; and sales in Europe jumped 6% to $98 million
and comps increase 2%. Other sales surged 73% to $21 million.
In constant currencies, sales in the Americas rose 3%, whereas
comps inched up 1% during the quarter; sales in the Asia-Pacific
region grew 2% but comps fell 4%; sales in Japan advanced 3%,
while comps grew 5%; and sales in Europe climbed 11%, whereas
comps jumped 8%.
Gross profit for the quarter dipped 2% to $464.3 million,
whereas gross margin contracted 350 basis points to 54.4% due to
rise in precious metal and diamond costs and lower margin
Tiffany opened 12 outlets during the quarter, including 7 in
the Americas, 3 in Asia-Pacific; and 1 each in Europe and Japan.
The company plans to add net 28 stores in fiscal 2012 with 13 in
the Americas, 8 in Asia-Pacific, 2 in Europe and 5 in the United
Arab Emirates (marking the commencement of operation in the
region). The company has already opened net 25 stores
As of October 31, 2012, the company operated 272 stores (113
in the Americas, 64 in Asia-Pacific, 56 in Japan, 34 in Europe
and 5 in the U.A.E.).
Other Financial Details
Tiffany ended the quarter with cash and cash equivalents and
short-term investments of $345.9 million, and total short-term
and long-term debt of $977.9 million, reflecting 40% of
shareholders equity compared with 31% in the prior-year.
So far in the fiscal year, Tiffany had repurchased about
813,000 shares at $66.54 each, aggregating $54 million during the
quarter. The company did not buyback any share during the quarter
Strolling Through Guidance
Tiffany lowered its fiscal 2012 guidance. The company now
projects earnings in the range of $3.20 to $3.40 per share, down
from $3.55 to $3.70 forecasted earlier. The current Zacks
Consensus Estimates for the fourth quarter and fiscal 2012 are
$1.61 and $3.59 per share.
Tiffany now expects total net sales growth of 5% to 6% for
fiscal 2012, down from 6% to 7% increase predicted previously.
Management projects capital expenditures of approximately $230
million for the year.
Currently we have a Neutral recommendation on the stock.
However, Tiffany holds a Zacks #2 Rank that translates into a
short-term Buy rating, and indicates a pick up demand this
holiday season resulting from new jewelry collections and more
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