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Analyzing Tiffany’s Q1 Earnings Beat

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Tiffany’s earnings

Tiffany (TIF) posted better-than-expected first-quarter earnings. Tiffany’s adjusted EPS of $1.03 was $0.01 ahead of analysts’ expectation due to share buybacks. Tiffany repurchased $25.4 million worth of shares in the first quarter.

Despite beating the estimates, Tiffany’s bottom line fell 9.6% on a YoY (year-over-year) basis due to weak sales, lower margins, and investments in growth initiatives. Tiffany’s gross margin fell by 130 basis points to 61.7%, which reflected lower sales, an unfavorable mix, and increased wholesale diamond sales.

In comparison, analysts expect Signet Jewelers to report a loss in the first quarter. Continued weakness in sales and lower margins are expected to hurt Signet Jewelers’ bottom line.

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Outlook

Tiffany’s management expects it’s fiscal 2019 earnings to mark low to mid-single-digit growth. Earlier, management forecasted mid-single-digit growth in its fiscal EPS. Tiffany’s bottom line is expected to improve in the second half of fiscal 2019. However, weakness in the first half of the year is expected to hurt the company’s overall EPS growth rate.

The expected improvement in margins and share repurchases will likely support Tiffany’s earnings in the second half of the year. However, Tiffany’s second-quarter earnings are expected to fall, which reflects lower sales, weak margins, and tough YoY comparisons.

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