Top line disappointed

Tiffany (TIF) disappointed with its sales performance in the fourth quarter of its fiscal year, missing analysts’ estimate. Tiffany’s top line decreased 1% on a year-over-year basis, reflecting lower tourist spending while the US dollar strengthens. Also, the lack of demand among local customers remained a drag.

Jewelers’ top line is also taking a hit from consumers’ demand shift toward low-priced fashion jewelry and accessories. Meanwhile, a higher competitive promotional environment remains a problem. Rival Signet Jewelers (SIG), which is to report its fourth-quarter results on April 3, is expected to post weak sales, owing to a heightened promotional environment.

Key Takeaways from Tiffany’s Fiscal Q4

Tiffany’s comps fell 1% year-over-year. Meanwhile, sales of engagement and designer jewelry declined 3% and 8%, respectively, in the fourth quarter. The graph above shows that Tiffany fell short of analysts’ sales estimates in the past two quarters.

How TIF performed on the profitability front

Soft sales weighed on Tiffany’s margins. Tiffany’s fourth-quarter gross margin decreased by ten basis points despite benefitting from lower input costs. Meanwhile, the company’s operating margin fell by 300 basis points, reflecting a lower gross margin rate and higher investments in growth measures.

Despite soft sales and weak margins, Tiffany’s bottom line beat analysts’ estimate, thanks to benefits from tax adjustments. Tiffany’s adjusted EPS of $1.67 came in ahead of Wall Street’s expectation of $1.60.

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