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Tiffany and Co. (TIF) Stock Rises After Q2 Earnings Beat: What's Next?

Christopher Vargas

Tiffany and Company TIF shares jumped over 2% in trading Wednesday after the company reported better-than-expected earnings results. The company is up 5.7% year-to-date, outpacing the broader retail jeweler market. Investors were preparing themselves for the worst for the company, as Tiffany’s growth trends have slowed for nearly a year. Let’s take a closer look at how the company performed in Q2 and what to expect from them in the near future.

Overview and Q2 Performance

Tiffany and Co. has been focusing on evolving its brand, enhancing omnichannel experience and solidifying their position in core markets. The company was founded in 1837 and is headquartered in New York. Through the company’s subsidiaries, it is engaged in designing, manufacturing, and retailing fine jewelry. Tiffany and Co. sells their products through catalogs, wholesale operations, retail stores, and other methods; it operates through five regional segments: Americas, Asia-Pacific, Japan, Europe, and other. The jewelry company currently operates more than 300 stores (at of the end of Q1).

In Q2, TIF beat our earnings estimate by 6.67%, but revenue of roughly $1.05 billion missed our estimate by 1.9%. The company’s Q2 earnings and revenue fell 4.27% and 2.55%, respectively. The Americas and Asia-Pacific regions both slipped in Q2 by 4% and 1%, respectively. Japan was flat and Europe took a hit of 4%.

The company’s comparable sales were not safe from Y/Y losses; the Americas dropped 4%, Asia-Pacific fell 3% and Europe tumbled 6%. Executives said the results were again impacted by slowing spending on the part of Chinese tourists visiting other major world cities. Tiffany and Co. lowered its sales outlook to predict roughly flat comps and its brand evolvement will involve aggressive marketing spending over the next six months.

Going Forward

The Y/Y losses are projected to come to a halt in Q3 as consensus estimates predict earnings to rally 14.29% to $0.88 and for revenue to make a 3% climb to $1.04 billion. Revenues in the Americas and Japan is forecasted to spike 4.07% and 6.34%, respectively. KCM estimates are anticipating sales in Asia-Pacific to rise 7.48% while Europe will see a decline of 4.39%. Comps for the Americas and Asia-Pacific are both forecasted to increase by 4% and Japan sales are expected to jump 2%. Looking ahead to the company’s current fiscal year estimates, earnings are predicted to pop 4.98% on the back of a 1% revenue gain to $4.49 billion.

Tiffany and Co. is a Zacks Rank #3 (Hold) and is trying to revitalize its company’s growth. Despite the company’s Y/Y troubles, TIF has beaten our estimates three out of the past four quarters for an average EPS surprise of 5.08%. The company has not been able to make any large gains this year as a result of its struggling growth. To turn things around, the company may have to spend aggressively on its brand’s revival, which will put pressure on its bottom line in the short term. Time will tell if the company will utilize the right merchandising and marketing strategies and return to growth. 

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