Tiffany vs. Walmart
Investors question performance of luxury stocks like Tiffany for its real expectations more than performance. For investors, luxury company stocks collapsed badly during the financial crisis. These companies will be benefit investors if consumer spending rebounds this year. Tiffany’s Chairman and CEO Michael Kowalski said there were some signs the sales decline was slowing. And the company had slashed overhead by 14% over the last year.
Tiffany (NYSE: TIF) is more sensitive to economic recovery and its international exposure makes the company vulnerable to any significant downturn in the global economy. Tiffany’s economic success was due to unprecedented demand from emerging Asia, where sales grew by 55%. As an aspirational brand, it makes for an easy target in market environments that put a premium on avoiding risk. Non-Japanese Asia accounted for 13% of Tiffany's worldwide sales last year, up from 10% two years earlier. And they rose by another 14% in local-currency terms in the second quarter - while U.S. sales fell 25%. Overall sales were a bit below forecasts Q1 down 15-20%.
Wal-Mart (NYSE: WMT) Retailers like Walmart is the obvious discount big box retailer. Wal-Mart is considered to be the most efficiently run retail business in the world, but it can't overcome weakness in its core demographics. The opposite of luxury retailers, discount retailers are a necessary part of retail to consider for investors.
The retailer’s U.S. same-store sales rose just 1 percent in the fourth quarter. The delay in income tax refunds has affected their business. Wal-Mart has cashed approximately $3 billion in tax return checks at its U.S. stores so far this year. Wal-Mart’ stock earned $5.61 billion, or $1.67 per share, from continuing operations in the fiscal fourth quarter, up from $5.19 billion, or $1.51 per share a year earlier. Wal-Mart’s FY 2012 sales were of approximately $444 billion.
52 Week High /Low: $ 77.60 / $ 57.18
Market cap 251,509,748,729
P/E Ratio: 15.22
Forward P/E(1y) 14.27
Earnings Per Share (EPS) $ 5.02
Annualized dividend $ 1.88
Ex Dividend Date Mar. 8, 2013
Dividend Payment Date Apr. 1, 2013
Current Yield 2.47 %
Family Dollar (NYSE: FDO) is a low beta stock. Family Dollar is known as what is called a "deep discount retailer." The majority of US consumers are still moving toward a simpler, less materialistic lifestyle. Luxury stocks are still volatile and investors should expect this until the economic system is stabilized. Shares fell 66 cents (-1.1%) to $59.78 on heavy volume April 11. The stock ranged in price between $59-$60.13. Shares are down 4.7% year to date.
Deep discount retailers might be the wisest companies for investing given the current economic factors residing over the broader market. Wealthier and better-educated Americans are still doing good in consumer spending areas yet Tiffany's sales still have higher risk to fall this year. Wal-Mart's have stayed about even, despite the recession. It leaves Tiffany’s stock vulnerable to another downturn or change in sentiment. Wal-Mart, by contrast, is more reasonably priced at better forecast earnings. Given that luxury retailers tend to be highly profitable and tend to have good balance sheets, investors might also consider investments in select brands.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.