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Tiffany Extends Buyback Program

Zacks Equity Research

Tiffany & Company (TIF) announced the extension of the expiration date of its share buyback program to Jan 31, 2014. The company, in January 2011, announced the prevailing share repurchase program of $400 million, which was set to expire on Jan 31, 2013.

So far, in fiscal 2012, Tiffany had repurchased about 813,000 shares at $66.54 each, aggregating $54 million and has approximately $164 million left under the current authorization. The company did not buyback any shares during the last reported quarter.

The announcement bears no good news for the shareholders as the company is not repurchasing any shares at present. Moreover, the extension only raises questions on the company’s cash flow generation capabilities and its capital deployment strategies.

What is more worrying is the company’s unfavorable market position in the wake of a challenging economy. This has taken a toll on the jewelry retailer as evident from its soft holiday sales results and a truncated outlook.

On a constant-currency basis, total worldwide net sales for the two months period ended Dec 31, 2012, marked an increase of 4%, whereas comparable-store sales (comps) remained flat. We observe that the rate of growth of net sales and comps decelerated from 6% and 4%, respectively, registered during the two months period ended Dec. 31, 2011.

Moreover, the company seems to be losing market share when compared to its peers, Zale Corporation (ZLC) and Signet Jewelers Limited (SIG), as Zale witnessed a 2.3% increase in its comps, while Signet marked a 3.3% rise in comps for the key holiday period.

Following soft holiday sales, Tiffany expects fiscal 2012 earnings to be at the lower end of the previously provided guidance range of $3.20 to $3.40 per share, when the company posted disappointing third-quarter fiscal 2012 results on Nov 29, 2012. The quarterly earnings of 49 cents a share missed the Zacks Consensus Estimate of 63 cents, and dropped sharply from 70 cents earned in the prior-year quarter. The current Zacks Consensus Estimate stands at $3.21 per share for fiscal 2012.

Consequently, we maintain our long-term Underperform recommendation on the stock. Moreover, shares of Tiffany hold a Zacks Rank #5 (Strong Sell).

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