Tiffany & Company (TIF) has posted stronger-than-expected third-quarter 2010 results buoyed by improved demand for luxury items worldwide. The quarterly earnings of 46 cents a share surpassed the Zacks Consensus Estimate of 36 cents, and rose 39% from 33 cents earned in the prior-year quarter.
The Zacks Consensus Estimate dipped by a penny over the last 7 days with only one out of 16 analysts covering the stock revising the estimate downward. On a reported basis, including one-time items, quarterly earnings came in at 43 cents a share, up 23% from 35 cents delivered in the year-ago quarter.
Tiffany, a high-end jewelry designer, manufacturer and retailer, remains optimistic about fiscal 2010, and forecasts earnings in the range of $2.72 to $2.77 per share, up from its previous guidance range of $2.60 to $2.65, sending the shares up 2.8% or $1.63 to $59.90 in pre-market trading.
Following an improved outlook, a positive sentiment may be palpable among the analysts covering the stock, and we could witness a rise in the Zacks Consensus Estimate in the coming days. The current Zacks Consensus Estimate for fiscal 2010 is $2.62.
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 a renewed demand for jewelry in the Americas, Asia-Pacific, Japan and European regions. Tiffany now anticipates total net sales for fiscal 2010 to rise by 12%.
Total revenue also surpassed the Zacks Consensus Revenue Estimate of $651 million. Comparable-store sales climbed 9% in the quarter under review. In constant currencies net sales jumped 12% and comps grew 7%.
The jewelry market was hit hard by the recent global meltdown, which triggered a shift in focus to cheaper private label brands, but as the recession eased demand for luxury items also improved. Tiffany is well positioned to deliver robust sales and earnings growth. The company holds a significant position in the world jewelry market and is poised to benefit from its increased geographic reach.
By geographic segment, sales in the Americas grew 9% to $331.8 million, whereas comps rose 6% during the quarter; sales in the Asia-Pacific region surged 24% to $127.1 million and comps increased 15%; and sales in Europe climbed 22% to $77.5 million and comps rose by 16%. Sales in Japan advanced 12% to $130.8 million, and comps grew by 8%. Other sales soared 26% to $14.6 million, reflecting rise in the wholesale sales of finished goods to independent distributors.
For fiscal year 2010, management now expects a mid-twenties percentage increase in sales in the Asia-Pacific region, high-teens percentage growth in Europe, 10% rise in the Americas and a low-single digit percentage growth in Japan. Other sales are expected to fall moderately compared with the previous year.
With signs of improvement in the retail environment, Tiffany now plans to open 14 stores in fiscal 2010. The company has already opened 6 stores. As of October 31, 2010, the company operated 225 stores.
Tiffany repurchased 588,000 shares at $43.68 each, aggregating $25.7 million. The company still has $329 million at its disposal under the existing authorization, which expires in January 2011.
The company ended the quarter with cash and cash equivalents of $529.5 million, and total short-term and long-term debt of $755 million, reflecting 38% of shareholders’ equity compared with 44% in the prior-year quarter.
Currently we have a Neutral rating on the stock. However, Tiffany holds the Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.
SIGNET GRP PLC (SIG): Free Stock Analysis Report
TIFFANY & CO (TIF): Free Stock Analysis Report
ZALE CORP NEW (ZLC): Free Stock Analysis Report
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