Tiffany's Earnings Miss, Up Y/Y - Analyst Blog

Tiffany & Company TIF posted fourth-quarter fiscal 2013 adjusted earnings of $1.47 per share that missed the Zacks Consensus Estimate of $1.52 but increased 5% from $1.40 in the prior-year quarter benefiting from higher sales and improved operating margin.

On a reported basis, including one-time items, the company delivered loss of 81 cents a share compared with quarterly earnings of $1.40 in the year-ago period. This designer, manufacturer and retailer of fine jewelry also provided initial earnings outlook for fiscal 2014 that came below analysts' expectation.

Shares of Tiffany tumbled 3.6% to $87.90 during pre-market trading hours.

Let's Unveil the Picture

Tiffany posted net sales of $1,298.3 million during the quarter, up 5% from the prior-year quarter, on the heels of healthy performance of stores in the Americas, Asia-Pacific and Europe regions and due to new collection launches. However, total revenue fell short of the Zacks Consensus Estimate of $1,303 million. In constant currencies, net sales jumped 9%, whereas comparable-store sales climbed 6%.

By geographic segment, sales in the Americas grew 6% to $659 million, while comps rose by an equivalent rate; sales in the Asia-Pacific region climbed 8% to $275 million, whereas comps increased 1%; sales in Japan declined 12% to $169 million and comps dipped 11%; and sales in Europe jumped 10% to $161 million and comps increased 5%. Other sales surged 47% to $35 million.

In constant currencies, sales in the Americas rose 7%, whereas comps grew by a similar rate during the quarter; sales in the Asia-Pacific region grew 11%, whereas comps rose 4%; sales in Japan advanced 8%, while comps also grew by 8%; and sales in Europe climbed 7%, whereas comps rose 2%.

Gross profit for the quarter increased 7% to $785.6 million, while gross margin expanded 140 basis points to 60.5% due to lower product cost and increase in prices. Adjusted operating income jumped 8% to $312.9 million, whereas operating margin increased 60 basis points to 24.1%.

Stores Update

Tiffany opened net 14 outlets during fiscal 2013. The company plans to add 13 stores — 4 in the Americas, 5 in Asia-Pacific, 2 in Japan, and 1 each in Europe and Russia, and has plans to shutter 4 outlets — 1 each in the Americas, Asia-Pacific, Japan and the U.A.E during fiscal 2014.

As of Jan 31, 2014, the company operated 289 stores (121 in the Americas, 72 in Asia-Pacific, 54 in Japan, 37 in Europe and 5 in the U.A.E.).

Other Financial Details

Tiffany ended fiscal 2013 with cash and cash equivalents and short-term investments of $367 million, and total short-term and long-term debt of $1,003.5 million, reflecting 37% of shareholders equity flat with the prior year. Management forecasted capital expenditures of approximately $270 million and expects to generate free cash flow of at least $400 million for fiscal 2014.

The company's Board of Directors also authorized a share repurchase program of $300 million, which is slated to expire on March 31, 2017.

Strolling Through Guidance

Tiffany now projects fiscal 2014 earnings between $4.05 and $4.15 per share. The current Zacks Consensus Estimate for fiscal 2014 is $4.26 per share, which could witness a downward revision in the coming days.

Tiffany now expects total net sales growth in high-single digit percentage for fiscal 2014 both in U.S. dollars and in constant currencies with growth across all regions.

Zacks Rank for Tiffany

Tiffany currently sports a Zacks Rank #3 (Hold). Other better ranked retail stocks that look promising include Zale Corp. ZLC, Hanesbrands Inc. HBI and Michael Kors Holdings Ltd. KORS, all carrying a Zacks Rank #1 (Strong Buy).