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Tiffany & Co. (TIF)
Tiffany & Co. Outlook Dazzles Investors
Tiffany & Co's outlook proves that all that glitters may actually be gold, especially if it comes in a blue box. Amid the weak economy and depressed consumer spending, the retailer famed for engagement rings and other baubles has kept its luster, and impressed investors as well. The New York-based jeweler released an upbeat forecast today which has investors clamoring to get their hands on shares, resulting in a more than 13 percent lift in early trading. Tiffany's results are stunning the market, proving that even in hard times diamonds really may be a girl's best friend, but will they be able to keep the momentum going as financial strains worsen for their clientele?
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When it comes to the family budget, most Americans have had to limit or completely eliminate discretionary spending on luxury items and shift those dollars to cover day-to-day expenses. This trend was evident even during holiday shopping when reports of decreased consumer spending first started to ripple through the retail market. Now, as gas prices continue to climb, affecting food and energy costs as well, consumers have been forced to resist treating themselves to non-essential goods and services. In conditions such as these, you'd think a mid-tier jewelry retailer like Tiffany & Co, famed as it may be, would be struggling under the weight of unsold inventory and mounting expenses.
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Tiffany's released results today that directly challenge that assumption, however, and investors couldn't be more excited. The company stunned analysts by posting higher-than-expected quarterly profits with earnings of $118.3 million, or 89 cents per share. This quarter's results were 16 percent lower than the same period last year, in which the company earned $140.5 million, or $1.02 per share. Excluding a one-time charge of 22 cents per share for loans extended to Tahera Diamond Corp, which sought protection from creditors in January, profit would have been $1.27 per share, easily beating analysts' forecasts for profits of $1.21 per share. During the quarter, sales increased 10 percent to $1.05 billion from $958.9 million during the fourth quarter last year.
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The 10 percent increase in sales came mostly from stores outside of the U.S., where comparable-store sales rose 12 percent, offsetting a 1 percent dip in U.S. comparable-store sales. Strength in markets other than the U.S. and Japan, where the company has a long-established presence, is the X-factor that's fueling the positive results this quarter. Tiffany & Co's expansion overseas in countries like Spain and Australia is a key component to its strategy for growth. CEO Michael Kowalski said, "Despite current uncertainties related to consumer confidence in the U.S., we will continue to take advantage of our strong balance sheet and infrastructure to pursue our planned expansion opportunities worldwide."
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Tiffany's expects to keep riding the wave of success and forecasts net earnings per share to rise by 11 to 15 percent to a range of $2.75 to $2.85 in the current fiscal year. Analysts have been polled estimating $2.28 per share and it is this sizable discrepancy that has inspired today's market activity. Overall sales growth is expected to be about 10 percent for the year, with low-single-digit growth coming from U.S. same-store sales and slightly higher international growth. Whether or not sales from U.S. stores will keep pace with expectations remains to be seen, but strong results from foreign markets will help keep Tiffany & Co. close to their investors' hearts.
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