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Tiffany Shows Stability on Fundamentals

Zacks Equity Research

We believe Tiffany & Company (TIF) is well positioned to support robust sales and earnings growth in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. Moreover, with nearly half of the total sales generated internationally, we believe that the company is well diversified from a regional perspective as well.

Tiffany remains committed to attain long-term objectives of at least 15% earnings growth and a 10% to 12% sales increase annually. Moreover, the company’s long-term objective is to attain ROA of at least 10% and ROE of at least 15%.

The company holds a significant position in the world jewelry market due to its distinctive brand appeal. We believe that the company intends to expand its distribution network by adding stores in both new and existing markets. The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin products, which in turn boosts store productivity. Tiffany concentrates on improving sales per square foot through an increase in customer traffic and converting them into potential buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.

Tiffany’s strong fundamentals and strategic approach facilitated it to post impressive first-quarter 2014 results, wherein earnings of 97 cents a share beat the Zacks Consensus Estimate of 77 cents and the prior-year quarter earnings of 70 cents. Results benefited from higher sales and improved operating margin. Net sales of $1,012.1 million grew 13% from the prior-year quarter, and surpassed the Zacks Consensus Estimate of $953 million.

Estimates have been showing an uptrend since the earnings announcement. This is evident from the movement witnessed in the Zacks Consensus Estimate that increased 3.1% to $4.28 for fiscal 2014 in the past 60 days. For fiscal 2015, the Zacks Consensus Estimate jumped 2.3% to $4.85 in the same period.

Tiffany, which competes with Signet Jewelers Limited (SIG), carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other better ranked retail stocks that look promising include Michael Kors Holdings Limited (KORS) and Hanesbrands Inc. (HBI), both sporting a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on TIF
Read the Full Research Report on SIG
Read the Full Research Report on HBI
Read the Full Research Report on KORS

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