Tiffany’s international exposure
Tiffany & Co. (TIF) has operations in the Americas, the Asia-Pacific region, Japan, and Europe. The Americas include the United States, Canada, Mexico, and Brazil.
International sales have been rising at Tiffany. Regions other than the United States contributed 58% of Tiffany’s total revenue in fiscal 2015, ended January 31, 2015, with 24% of total revenue coming from the Asia-Pacific region.
Tiffany faces slower growth
The top five diamond markets of the world—the United States, China, India, Japan, and the Gulf region—account for 75% of global demand. However, the jewelry market noticed a fall in the holiday season of 2014 due to the strengthening of the US dollar against the currencies of several diamond consumer markets. Continued strengthening of the US dollar in 2015 may lead to slower growth for the jewelry market.
Tiffany is experiencing the negative effects of the strong US dollar. In the first nine months of fiscal 2016, which for the company ended on October 31, 2015, net sales fell by 2% YoY (year-over-year). On a constant currency basis, sales rose by 4% YoY.
If Tiffany wants to gain market share in the long run, it has to keep an eye on growth opportunities in the international market.
Peer group comparison
By comparison, Signet Jewelers (SIG), which operates mainly in the United States, with 87% of its revenue coming from the United States, is less affected by the stronger US dollar.
Fossil (FOSL), which generated 54.7% of its revenue from international operations in fiscal 2014, reported a fall of 8.5% in its net sales for the first nine months of fiscal 2015, ended on October 3, 2015. On a constant currency basis, net sales at Fossil were flat for the same period.
Tiffany is a component of the SPDR S&P 500 ETF (SPY). Tiffany, Signet, and Fossil all have exposure in the iShares Russell 1000 Growth ETF (IWF) and the iShares Core S&P 500 ETF (IVV). Together, these companies make up 0.12% of the portfolio holdings of IWF and 0.19% of the holdings of IVV.
IVV measures the performance of the large-capitalization sector of the US equities market, tracking the top 500 stocks. IWF is a growth-oriented ETF. Tiffany and Signet together represent 2.1% of the SPDR S&P Retail ETF (XRT). Specialty retail companies make up 18.1% of XRT.