Stock of the Day
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Tiffany & Co. (TIF)
Will Tiffany's Future Shine Again?
It seems like every company wants to jump on the positive bandwagon now that the economy has started to recover. Consumer driven businesses should not be so quick to assume that the positive momentum will automatically spill over into their earnings. Towards the beginning of 2009, Tiffany was feeling the pressure of the recession as sales dwindled. Fast-forward six months and now the company is more confident about its future despite a dip in second-quarter profits. Tiffany & Co.'s fiscal second-quarter earnings fell 30% on continued US sales weakness, but results topped expectations and prompted the high-end jeweler to raise its full-year earnings outlook. Why is the luxury-jewelry retailer so optimistic about the future? As consumers return to the market, will diamonds rings and ruby bracelets be on their shopping lists?
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| Stock Analysis |
Retailers have been some of the hardest hit suppliers during this recession. These businesses watched sales decline quickly as unemployment reached record levels and forced cash-strapped consumers to cut back. These same issues continued to hurt Tiffany's sales during the second-quarter. The company posted a profit of $56.8 million, or 46 cents a share, down from $80.8 million, or 63 cents a share, a year earlier. Revenue decreased 16% to $612.5 million as same-store sales also fell 16%. With numbers like these one would think that the company would be less inclined to raise its forecast. That's not the case with Tiffany. The retailer said that sales trends in August are meeting its expectations and many of its stores are seeing either a slower rate of sales declines or modest growth compared with the prior two quarters. Basically, Tiffany is betting on these trends continuing in the coming months. It looks like the company may be putting too many of its eggs in one basket.
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At one point, Tiffany resisted moving downscale. Now the company is singing a very different tune with its introduction of the Keys collection, which includes pieces ranging from $150 to $15,000. Even with the introduction of this discounted collection, will people really purchase jewelry when they start spending money again? Most likely yes, but not at the level that Tiffany is use to. The company is expecting 2009 earnings from continuing operations of $1.65 to $1.75 per share, up from a prior outlook of $1.50 to $1.60 per share. Michael J. Kowalski, chairman and chief executive officer said “We believe the current environment provides opportunity for significant gains in market share.” Hopefully Mr. Kowalski's predictions are correct.
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More Views on Tiffany
Tiffany Yet To Sparkle -- This guy is still not impressed by Tiffany's progress.
A Bull Market Can Be Tiffany's BFF -- Can a bull market in equities help move the merchandise of a luxury goods retailer?
Recovery Watch: Tiffany's Glimmer of Hope
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Profile |
Click here to view a detailed profile of Tiffany & Co..
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