What Tiffany Has In Store For The Upcoming Season

Author's Avatar
Dec 24, 2014

As the holiday season sets in, the luxury product retailers are getting well-equipped to make the most of this peak season. Adding to the merriment is the decline in oil prices, which should increase the spending ability of the customers.

Tiffany (TIF, Financial) is an upscale jeweler which provides fine accessories and jewelry to the affluent part of the society. The company's third quarter numbers were not up to the mark since it was unable to meet the Street's expectations. However, a bright outlook for the year, made investors happy. This resulted in a rise in share price.

Insight of the quarter

Revenue for the quarter rose 5.3% to $959.6 million, over last year. This was slightly below the analysts' estimate of $970.2 million. The growth in the top line was driven by an increase in domestic demand for its products, which was partially offset by unfavorable currency fluctuations in the international market. The retailer also added 1 new store in Japan, which added to the revenue. Higher demand for its products resulted in a same store sales growth of 4%.

Going by the regions, the Americas were the best performing segment during the quarter. Revenue from the region surged 10.1% over last year, driven by same store sales growth of 11%. This growth is important since it makes almost 50% of the total revenue. However, even other regions registered growth. Sales in the Asia-Pacific region inched up by 2.1% and that in the Europe surged 9.6% during the quarter. But, revenue from Japan dropped 11.7% as its same store sales declined 6%. Demand in Japan was low mainly due to the levy of consumption tax which resulted in lower sales. Nonetheless, the jeweler opened a new store in Japan, showing confidence in the region.

The gross margin of the company also expanded 250 basis points to 59.5%. This was mainly because of a number of favorable factors such as an increase in product prices, favorable product costs and a shift in customer demand to higher margin Jewelry. Further, the earnings of the company surged to $0.76 per share from $0.73 per share in the prior year. This was lower than the expectation of $0.78 per share.

Some noticeable efforts

Tiffany remains focused on launching new products which attract more and more customers. In fact, it introduced the new T collection in the third quarter itself, the demand for which has been impressive.

The company is also looking into expanding its geographic footprint by opening new stores in new regions. This should add to the revenue base. The domestic market too is growing remarkably and should be a bright spot in the future.

However, weakness in Japan and Europe is a matter of concern for the company, which is the reason why the retailer missed on analysts' top line expectations.

The bottom line

It is clear that the jeweler is doing pretty well and extinguished its debt worth $400 million during the quarter. It also repurchased shares worth $5.8 million during the quarter, which delighted the investors. Further, it reaffirmed its outlook for the year and plans to open a total of 10 new stores during the year. Moreover, a dividend yield of 1.4% makes this retailer an attractive pick.