Tiffany's Earnings Beat, Ups Outlook - Analyst Blog

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Tiffany & Company ( TIF ) posted better-than-expected second-quarter fiscal 2013 results due to surge in demand in the Asia-Pacific region, primarily in Greater China. The quarterly earnings of 83 cents a share surpassed the Zacks Consensus Estimate of 74 cents, and rose 15.3% from 72 cents in the prior-year quarter benefiting from higher sales and improved operating margin. Consequently, management provided an upbeat guidance.

Let's Unveil the Picture

Tiffany posted net sales of $925.9 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 due to new collection launches. However, total revenue fell short of the Zacks Consensus Estimate of $939 million. In constant currencies, net sales jumped 8%, whereas comparable-store sales climbed 5%.

By geographic segment, sales in the Americas grew 2% to $444 million, while comps remained unchanged during the quarter; sales in the Asia-Pacific region climbed 20% to $208 million, whereas comps increased 13%; sales in Japan declined 14% to $136 million and comps dipped 13%; and sales in Europe jumped 11% to $111 million and comps increased 8%. Other sales surged 33% to $26 million.

In constant currencies, sales in the Americas rose 2%, whereas comps remained unchanged during the quarter; sales in the Asia-Pacific region grew 20%, whereas comps rose 13%; sales in Japan advanced 7%, while comps grew 8%; and sales in Europe climbed 10%, whereas comps rose 7%.

Gross profit for the quarter increased 6.6% to $532.1 million, while gross margin expanded 120 basis points to 57.5% due to lower product cost and increase in prices, offset by lower margin carrying products. Operating income jumped 14.4% to $176.9 million, whereas operating increased 170 basis points to 19.1%.

Stores Update

Tiffany opened 3 outlets during the quarter and shuttered one. The company plans to add net 14 stores in fiscal 2013 with 6 in the Americas, 7 in Asia-Pacific, 3 in Europe and closing 1 location each in Asia-Pacific and Japan.

As of Jul 31, 2013, the company operated 277 stores (116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and 5 in the U.A.E.).

Other Financial Details

Tiffany ended the quarter with cash and cash equivalents of $489.7 million, and total short-term and long-term debt of $964.2 million, reflecting 35% of shareholders equity compared with 39% in the prior-year. Management forecasted capital expenditures of approximately $230 million and free cash flow of $300 million for fiscal 2013.

Strolling Through Guidance

Tiffany now projects fiscal 2013 earnings between $3.50 and $3.60 per share, up from its previous forecast of $3.43 to $3.53. The current Zacks Consensus Estimate for fiscal 2013 is $3.52 per share.

Tiffany now expects total net sales growth in mid-single digit for fiscal 2013. In constant currencies, total net sales are projected to increase in the high-single-digit. Operating earnings is envisioned to grow at a rate higher than that of sales.

Tiffany currently has a Zacks Rank #2 (Buy). Other retail stocks that look promising and are expected to continue with their upbeat performance include Hanesbrands Inc. ( HBI ), Michael Kors Holdings Ltd. ( KORS ) and hhgregg, Inc. ( HGG ), all of which carry a Zacks Rank #1 (Strong Buy).



HANESBRANDS INC (HBI): Free Stock Analysis Report

HHGREGG INC (HGG): Free Stock Analysis Report

MICHAEL KORS (KORS): Free Stock Analysis Report

TIFFANY & CO (TIF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: HBI , HGG , KORS , TIF

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