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Extra Sparkle: Tiffany Beats Fiscal 2Q17 Estimates

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Extra Sparkle: Tiffany Beats Fiscal 2Q17 Estimates PART 1 OF 4

What’s behind Tiffany’s Fiscal 2Q17 Earnings Beat?

EPS beat the estimate

Tiffany (TIF) reported better-than-expected fiscal 2Q17[ended July 31, 2017] results on August 24, 2017. Tiffany’s adjusted EPS (earnings per share) of $0.92 exceeded Wall Street analysts’ estimate and rose 9.5% YoY (year-over-year) due to a lower input cost and more wholesale sales. The following graph shows that the company beat analysts’ expectations for the past six consecutive quarters despite weakness in the US (SPY).

What’s behind Tiffany’s Fiscal 2Q17 Earnings Beat?

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In comparison, Signet (SIG) also reported improved bottom line results. Increased comps following higher digital sales and cost-cutting measures boosted its EPS growth rate. The company’s EPS rose 25.5% YoY.

What drove Tiffany’s EPS?

Tiffany’s fiscal 2Q17 EPS benefited from lower input costs, primarily associated with diamond acquisitions. Improved pricing, lower interest and other expenses, and a lower effective tax rate supplemented the bottom-line growth.

During the reported quarter, the company’s margin expanded by 40 basis points to 62.3%, which reflected low input costs, a favorable mix, and a low single-digit increase in worldwide pricing. The operating margin improved by 10 basis points to 18.9%. The operating margin from the increased gross margin partially offset an increase by 20 basis points in SG&A[selling, general and administrative expenses].

Management reaffirmed its earlier guidance. It expected the adjusted EPS to rise in the mid single-digit range for fiscal 2017. The company’s bottom line will likely benefit from lower input costs, price improvements, and productivity and cost savings. However, weak tourist spending, negative currency movement, and the company’s investment in growth could hurt the EPS growth rate.

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