Tiffany & Company
) posted better-than-expected third-quarter 2011 results buoyed by
improved demand for luxury items worldwide and consequently raised
its full year outlook. The quarterly earnings of 70 cents a share
surpassed the Zacks Consensus Estimate of 60 cents, and surged 52%
from 46 cents earned in the prior-year quarter.
The Zacks Consensus Estimate rose by a penny over the last 30
days with only 3 out of 17 analysts covering the stock revising
their estimates upward, and none lowering the same.
Let's Unveil the Picture
Tiffany, which faces stiff competition from
Signet Jewelers Limited
), posted net sales of $821.8 million during the quarter, up 21%
from the prior-year quarter, on the heels of stellar performance of
stores in the Americas, Asia-Pacific, Japan and European regions,
healthy comparable-store sales growth and new collection
Total revenue also handily beat the Zacks Consensus Estimate of
$798 million. Comparable-store sales climbed 19% in the quarter
under review. In constant currencies net sales jumped 17% and comps
By geographic segment, sales in the Americas grew 17% to $387.7
million, whereas comps rose 15% during the quarter; sales in the
Asia-Pacific region surged 44% to $183.2 million and comps
increased 40%; sales in Japan jumped 12% to $146.4 million and
comps grew by 13%; and sales in Europe climbed 19% to $92.5 million
and comps rose by 10%.
In constant currencies sales in the Americas grew 17%, whereas
comps rose 15% during the quarter; sales in the Asia-Pacific region
surged 40% and comps increased 36%; sales in Japan advanced 3% and
comps grew by 4%; and sales in Europe climbed 15% and comps rose by
Other sales dropped 19% to $11.9 million, reflecting fall in the
wholesale sales of end goods to independent distributors and lower
wholesale sales of rough diamonds.
Gross profit for the quarter jumped 19% to $475.8 million;
however, gross margin contracted 60 basis points to 57.9%.
Operating income increased 50% to $146.2 million, whereas operating
margin expanded 350 basis points to 17.8%.
Tiffany now plans to add net 14 stores in fiscal 2011 with 6 in
the Americas, 3 in Europe and 6 in Asia-Pacific. The company also
plans to close one location in Japan.
As of October 31, 2011, the company operated 243 stores (101 in
the Americas, 55 in Japan, 55 in Asia-Pacific and 32 in
Other Financial Details
Tiffany repurchased about 1.3 million shares at $65.37 each,
aggregating $86.3 million during the quarter. In first-nine months
of fiscal 2011, the company bought back approximately 2.1 million
shares at $65.97 each totaling $138.8 million.
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 of shares. As of October 31, 2011, the
company has approximately $253 million at its disposal for future
Tiffany ended the quarter with cash and cash equivalents and
short-term investments of $297.4 million, and total short-term and
long-term debt of $708.8 million, reflecting 31% of shareholders'
equity compared with 38% in the prior-year.
Strolling Through Guidance
Tiffany, a high-end jewelry designer, manufacturer and retailer,
raised its fiscal 2011 earnings guidance on the back of
better-than-expected results. The company forecasts earnings in the
range of $3.70 to $3.80, reflecting a growth of 26% to 30%. For the
fourth quarter, management projects earnings between $1.48 and
$1.58 per share.
The current Zacks Consensus Estimate for fiscal 2011 is $3.75
per share that dovetails with management's guidance range. The
current Zacks Consensus Estimate for the fourth quarter is $1.63
that lies above forecasted range.
Following a revision in the outlook, we could witness a
correction in the Zacks Consensus Estimates in the coming days with
analysts tweaking their estimates to better align with earnings
outlook. Earlier, management had forecasted fiscal 2011 earnings in
the range of $3.65 to $3.75 per share.
Tiffany now anticipates a high-teens percentage rise in total
net sales for fiscal 2011. Management expects a high-teens
percentage increase in sales in the Americas, at least a 35% rise
in the Asia-Pacific, a minimum increase of 20% in European regions,
and at least a 10% jump in Japan. Other sales are projected to fall
Management anticipates capital expenditures of approximately
$250 million for fiscal 2011.
The jewelry market was hit hard by the recent global meltdown,
which resulted in a shift in focus to cheaper private label brands,
but as the recession eased demand for luxury items also improved.
The company holds a significant position in the world jewelry
market and is poised to benefit from its increased geographic
reach. The company generates nearly half of the total sales
internationally. We believe that Tiffany is well positioned to
deliver robust sales and earnings growth.
The company is focused on opening smaller stores that offer
selected collections of lower-priced, higher-margined product,
which in turn boosts store productivity. Tiffany concentrates on
improving sales per square foot through an increase in customer
traffic and converting them into potential buyers by targeted
advertising, ongoing sales training and customer-oriented
The brand appeal, strategic initiatives and a brighter outlook
bolster a sense of confidence in the stock even amid a dwindling
economy. But we have to wait and watch as to how the cautious
consumers react to the sparkles of Tiffany in the upcoming holiday
season. As of now we have a short-term 'Hold' recommendation on the
stock, which is well defined through our Zacks #3 Rank. However, we
maintain our long-term 'Outperform' recommendation on Tiffany.
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