Tiffany in 2017: What to Expect



Recent performance instills confidence

In fiscal 2016, Tiffany (TIF) had been witnessing dwindling sales, as the chart below reflects. However, things started to improve during the second half of fiscal 2016, on account of increased spending by Japanese tourists. Tiffany reported better-than-expected fiscal 4Q16 (ended January 31) results. The company’s adjusted EPS (earnings per share) of $1.45 came in well ahead of Wall Street’s estimate of $1.38. But it fell ~0.7% on a YoY (year-over-year) basis.

Healthy sales growth in Asia-Pacific (mainly China) and Japan as well as lower input costs boosted these bottom-line results.

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Despite the macroeconomic challenges and lower consumer spending in the US (SPY), Tiffany’s top line rose 1% YoY (year-over-year) to $1.23 billion in fiscal 4Q16, surpassing the analysts’ estimate of $1.22 billion. A shift in consumer’s taste and preference patterns toward low-priced, stylish brands is hurting Tiffany’s attractiveness.

However, the company’s focus on the fashion jewelry segment through new designs and its higher number of product offerings under $500 could reverse this trend. Tiffany is witnessing increased sales in its fashion jewelry segment led by higher sales of gold jewelry in its “T Collection.” Meanwhile, its silver jewelry sales, which until now witnessed declines, are seeing signs of stabilization.

Encouraging outlook

Tiffany expects its top line to increase by low-single digits in fiscal 2017. Its new product offerings, especially in its fast-growing fashion jewelry segment, global square footage expansion, store remodeling, and focus on its e-commerce and omnichannel capabilities are all likely to foster top-line growth. However, soft sales in the US and the UK and adverse currency movement will likely remain a drag. On a constant exchange rate basis, Tiffany expects sales to increase in the mid-single-digit range.

At the same time, increased sales, price restructuring, lower input costs, and productivity savings are likely to impact margins positively. In the meantime, the company’s adjusted EPS is expected to increase by in the mid-single-digit range on a YoY basis.

Continue to the next part for a look at Tiffany in Asia-Pacific and Japan.


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