Earning Preview: Tiffany

Tiffany & Company (TIF) is scheduled to report its fourth-quarter 2010 financial results before the bell on Monday, March 21, 2011. The current Zacks Consensus Estimate for the quarter is $1.39 per share with revenue at $1,092 million.

Third-Quarter 2010, a Synopsis

Tiffany, a high-end jewelry designer, manufacturer and retailer, posted stronger-than-expected third-quarter 2010 results buoyed by a growth in demand for luxury items worldwide. The quarterly earnings of 46 cents per share surpassed the Zacks Consensus Estimate of 36 cents and rose 39% from 33 cents in the prior-year quarter.

Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), posted net sales of $681.7 million during the quarter, up 14% from the prior-year quarter, signaling renewed demand for jewelry in the Americas, Asia-Pacific, Japan and European regions. Total revenue also surpassed the Zacks Consensus Estimate of $651 million.


Management expects Tiffany to attain record sales and earnings results during fiscal 2010. Witnessing a pick up in worldwide demand for higher-priced jewelry, Tiffany had earlier hinted that it would achieve net sales of $3.1 billion and that it remains on track to post earnings in the range of $2.83 to $2.88 per share in fiscal 2010.

Fourth-Quarter 2010 Zacks Consensus

The analysts considered by Zacks, expect Tiffany to post fourth-quarter 2010 earnings of $1.39 per share. The current Zacks Consensus Estimate reflects a growth of 27.5% from the prior-year quarter’s earnings. The current Zacks Consensus Estimate for the quarter ranges between $1.37 and $1.41.

Zacks Agreement & Magnitude

Of the 15 analysts following the stock, only one has increased the projection and none lowered their estimates, resulting in an increase of a penny in the Zacks Consensus Estimate over the last 30 days. In the last 7 days, none of the analysts have revised their estimates, keeping the Zacks Consensus Estimate unchanged.

Mixed Earnings Surprise History

With respect to earnings surprises, Tiffany has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 4.4% to positive 33.3%. The average remained at positive 15.1%. This suggests that Tiffany has beaten the Zacks Consensus Estimate by an average of 15.1% in the trailing four quarters.

Tiffany to Outperform

Tiffany is well positioned to support robust sales and earnings growth 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 holds a significant position in the world jewelry market due to its distinctive brand appeal. 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 boost 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.

Currently, we have a long-term “Outperform” rating on the stock. However, we remain concerned about Tiffany’s operations in Japan, which was recently hit by the earthquake and tsunami. The company operates approximately 55 stores in Japan and generates 19% of its sales from the country. We believe that analysts at large will be expecting an update on the company’s operations in Japan from Tiffany’s management.

Consequently, the stock holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

TIFFANY & CO (TIF): Free Stock Analysis Report

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