Analysis For Tiffany & Co
Wednesday, 2 July 2008
Tiffany is showing its global strength as sales rose 12% in the first quarter on strong demand in Europe and Asia. The company also raised guidance for the rest of the year. Tiffany has surprised on estimates each of the last four quarters on average of 15.87%. The company has a forward P/E of 13.64.
Full Analysis
Tiffany & Co (TIF) operates jewelry and specialty retail stores around the world and sells direct to customers through the Internet, catalogs and business gift operations. The company, founded in 1837 in New York City, is also involved in jewelry manufacture and product design.
Tiffany’s largest segment is in jewelry with the rest in timepieces, sterling silver ware, china, crystal, stationery, fragrances and accessories.
The company, has been making a big push into China. On June 10, TIF announced the opening of its eighth Chinese store, this one located in Qingdao, China.
The 2,000-square-foot store will be located in Hisense Plaza, which is in the city’s shopping district and near hotels and the local yacht club. Tiffany currently has two stores each in Beijing and Shanghai, and one store each in Tianjin, Shenyang and Chengdu.
Tiffany Surprises on First Quarter Estimates by 21.95%
On May 30, Tiffany reported first quarter earnings that beat Wall Street estimates by 21.95%. Net earnings rose 20% to $64.4 million, or 50 cents per share, from $53.8 million, or 39 cents per share, in the first quarter 2007.
Sales increased 12% to $668.1 million compared to $595.7 million in 2007. Europe saw the largest sales increase, rising 38% to $60.1 million compared to $43.5 million. Some of the increase was due to translation of currency exchange rates but comparable store sales grew 12% and there was incremental sales from four new stores.
Asia-Pacific, which includes Japan and the Middle East, also saw a healthy increase of 21% to $222 million from $183.1 million in 1997. The company said there was strong growth in all countries, except Japan.
In the Americas region, sales increased 6% but in the United States they were flat compared to a year ago. The flagship store in New York saw sales rise 16%, mainly due to increased sales from foreign tourists. Internet and catalog sales were up 1% in the U.S. from the year-ago period.
Tiffany Lifts Outlook for the Year
The company continues to be bullish, despite the slowdown in the United States. Global sales in May were meeting the company’s expectation, which meant strong growth in Asia-Pacific, outside of Japan, and in Europe. This growth is expected to offset the still weak U.S. market. TIF expects U.S. sales to improve later in the year.
Tiffany said it expects net earnings per share to rise to the range of $2.80 to $2.90 per share for the year.
Consensus Estimates Rise for the Second Quarter and the Full Year
Analysts responded to the earnings surprise and Tiffany’s optimistic outlook by raising estimates for the second quarter and the full year. For the second quarter, five out of nine covering analysts raised estimates on average of two cents in the last 30 days to 55 cents from 53 cents per share. One analyst also lowered in the last month.
For the full year, estimates climbed six cents to $2.85 from $2.79 per share, which is in-line with the company’s forecasted guidance range.
Tiffany’s forward P/E is 13.64. Its price-to-book is 2.95. The company has a solid average five year return on equity (ROE) of 15.03%. Additionally, Tiffany sports a dividend yield of 1.60% in an industry where it’s rare for a company to any dividend.
Source: ZACKS.com
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