U.S. Markets closed

Tiffany Misses, Trims Outlook

Zacks Equity Research

Tiffany & Company (TIF) posted lower-than-expected first-quarter 2012 results. The quarterly earnings of 64 cents a share missed the Zacks Consensus Estimate of 69 cents, and dropped from 67 cents earned in the prior-year quarter. The disappointing bottom-line result was a reflection of dismal performance in the Americas region due to soft demand for jewelry.

Despite registering a growth in the top line, the company witnessed a drop in the bottom line due to a 10% rise in the cost of sales and an 11% increase in selling, general and administrative expenses. Given the weaker-than-expected results and sluggish economic recovery in most of the countries, management trimmed its fiscal 2012 outlook.

On a reported basis, including one-time items, earnings inched up 1% to 64 cents a share from 63 cents delivered in the year-ago period. The prior-year quarter earnings included headquarters relocation costs of 4 cents.  

Let’s Unveil the Picture

Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), posted net sales of $819.2 million during the quarter, up 8% from the prior-year quarter, on the heels of healthy performance of stores in the Asia-Pacific and Japan regions, comparable-store sales growth and new collection launches.

Total revenue came ahead of the Zacks Consensus Estimate of $818 million. Comparable-store sales climbed 4% in the quarter under review. In constant currencies, net sales jumped 8% and comps grew 4%.

By geographic segment, sales in the Americas grew 3% to $386 million, whereas comps fell 1% during the quarter; sales in the Asia-Pacific region surged 17% to $195 million and comps increased 11%; sales in Japan jumped 15% to $142 million and comps also grew by 15%; and sales in Europe climbed 3% to $88 million but comps dropped by 4%.

Other sales tumbled 14% to $9 million, reflecting a fall in the wholesale sales of end goods to independent distributors.

Gross profit for the quarter jumped 6% to $469 million; however, gross margin contracted 100 basis points to 57.3%.

Stores Update

Tiffany opened 4 outlets during the quarter. The company plans to add 24 stores in fiscal 2012 with 9 in the Americas, 8 in Asia-Pacific, 2 in Europe and 5 in the United Arab Emirates (marking the commencement of operations in the region).

As of April 30, 2012, the company operated 251 stores (105 in the Americas, 59 in Asia-Pacific, 55 in Japan and 32 in Europe).

Other Financial Details

Tiffany repurchased about 700,000 shares at $66.42 each, aggregating $46 million during the quarter.

In January 2011, Tiffany announced a new share repurchase program, overriding the previous program. The new program, which is set to expire on January 31, 2013, authorizes the company to buy back up to $400 million in shares. As of April 30, 2012, the company has approximately $171 million at its disposal for future buybacks.

Tiffany ended the quarter with cash and cash equivalents and short-term investments of $343 million, and total short-term and long-term debt of $834.4 million, reflecting 35% of shareholders’ equity compared with 30% in the prior-year. Capital expenditures for the quarter were $44 million.

Tiffany recently raised its quarterly dividend by 10%. This is the 11th time the company has hiked its dividend in the last 10 years. The board approved an increase in annual dividend to $1.28 per share (or 32 cents quarterly) from $1.16 (or 29 cents quarterly). The increased dividend is slated to be paid on July 10, 2012, to shareholders of record as of June 20.


Tiffany, a high-end jewelry designer, manufacturer and retailer, lowered its fiscal 2012 guidance. The company now projects earnings in the range of $3.70 to $3.80 per share, down from $3.95 to $4.05 forecasted earlier.

The current Zacks Consensus Estimate for fiscal 2012 is $3.98 per share, falling short of management’s guidance range. Consequently, we could witness a correction in the Zacks Consensus Estimates in the coming days, with analysts revising their estimates to better align with the earnings outlook.

Tiffany now expects total net sales growth of 7% to 8% for fiscal 2012, down from 10% predicted previously.

Management anticipates capital expenditures of approximately $240 million for the year.

Holds Zacks #3 Rank

Currently, Tiffany holds a Zacks #3 Rank, which translates into a short-term Hold rating. Moreover, we have a long-term Neutral recommendation on the stock.

Read the Full Research Report on TIF

Read the Full Research Report on SIG

Read the Full Research Report on ZLC

Zacks Investment Research

More From Zacks.com