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Tiffany Misses on Q3 Earnings & Sales, Lowers Guidance

Tiffany & Co.TIF continued with its dismal run in the third quarter of fiscal 2015. Following the disappointing results, this jewelry retailer trimmed its earnings per share projection for fiscal 2015. Shares of this Zacks Rank #4 (Sell) stock are down 3.5% during pre-market trading session.

The quarterly earnings of 70 cents a share missed the Zacks Consensus Estimate of 74 cents, and fell 7.9% from 76 cents delivered in the year-ago quarter. Strong U.S. dollar and increased selling, general and administrative expenses hurt the company's bottom-line.

Net sales came in at $938.2 million, down 2.2% from $959.6 million recorded in the prior-year quarter, and way below the Zacks Consensus Estimate of $972 million. Net sales also fall victim of the foreign currency headwinds that lowered the value of the sales generated in the overseas market and also resulted in reduced spending by tourist. Comparable-store sales (comps) declined 5%.

However, in constant currencies, net sales and comps jumped 4% and 1%, respectively, reflecting growth across Japan, Europe and Asia-Pacific regions.

By geographic segments, sales in the Americas fell 7% to $425 million, while comps declined by 9%. Sales in the Asia-Pacific region fell 2% to $238 million, and comps dropped 5%. Sales in Japan jumped 17% to $133 million and comps rose by 9%, and sales in Europe came in at $112 million, down 2%, while comps decreased 5%. Other region sales came in at $30 million almost even with the year-ago period, while comps declined 18%.

In constant currencies, net sales and comps in the Americas fell 5% and 6%, respectively, from the year-ago quarter. Sales in the Asia-Pacific region grew 6%, while comps jumped 2%. Sales in Japan surged 34%, while comps increased 24%. Sales and comps in Europe soared 9% and 6%, respectively.

Gross margin expanded 70 basis points to 60.2% during the quarter on the back of favorable product input expenses and higher price, partly offset by a shift in sales mix to higher-priced, relatively low margin products. Operating margin contracted 90 basis points to 16.7%.

Store Update

During the quarter, Tiffany opened 2 company-operated outlets in Santiago, Chile; and in Macau, and closed 1 store in Korea. As of Oct 31, 2015, the company operated 305 stores (125 in the Americas, 79 in Asia-Pacific, 56 in Japan, 39 in Europe, 5 in the U.A.E. and 1 in Russia).

Other Financial Details

Tiffany ended the quarter with cash and cash equivalents and short-term investments of $725.1 million, and total short-term and long-term debt of $1,079 million, reflecting 38% of shareholders equity. Capital expenditures of $159 million were incurred during the first nine months of fiscal 2015.

Tiffany bought back shares worth $60 million in the quarter and $116 million in the first nine months of fiscal 2015. As of Oct 31, 2015, the company had $157 million at its disposal under the share repurchase authorization of $300 million that will expire in Mar 2017.

Management now anticipates capital expenditures of $260 million and expects to generate free cash flow of more than $500 million, up $100 million from the previous forecast.

Guidance

Given the global turbulence and the strong dollar, management now projects fiscal 2015 earnings to decline 5% to 10% from last year's $4.20 per share. Earlier, the company had envisioned full year earnings to fell 2% to 5% from last year's results.

Favorably Ranked Stocks

Better-ranked stocks in the retail sector include American Eagle Outfitters, Inc. AEO , sporting a Zacks Rank #1 (Strong Buy), NIKE, Inc. NKE and Hanesbrands Inc. HBI , both carrying a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.


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

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