When I last revisited Tiffany’s (NYSE:TIF) in early December, this luxury-jewelry retailer was flying high. But with the U.S. dollar gaining strength against other currencies, this international powerhouse’s margins are getting squeezed. Let’s review Tiffany’s first-quarter earnings announcement from this morning and determine whether we should buy into the little blue box.
Characterized by its powder blue gift boxes, Tiffany is a globally-recognized name in high-end jewelry, especially diamonds. With its headquarters in New York City, Tiffany employs 9,800 around the world. This company has been one of the few high-end retailers that has refused to discount their merchandise, going so far as to state that to do so would be a breach of trust and a lessening of the value of their brand.
In the first quarter, Tiffany reported softening sales in the United States. However, business was booming in Japan and other parts of Asia, so the company still pulled off an 8% year-over-year increase in net sales. Tiffany pulled in $819.2 million in sales, which topped the $817.5 million consensus sales estimate modestly.
At the same time, adjusted earnings declined from 67 cents per share to 64 cents per share. Analysts forecast earnings of 69 cents per share, so the company posted a 3% earnings miss.
But, what really caused shares of TIF to gap down at yesterday was that management has slashed its 2012 sales and earnings guidance. Whereas leadership previously expected 10% net sales growth, it now only forecasts 7% to 8% growth. Additionally, leadership now expects earnings in the range of $3.70 to $3.80 per share; before the company was headed towards $3.95 to $4.05 per share.
There are currently 38 separate players in the Jewelry Stores industry. Of these, Tiffany is 11th in terms of market cap, but the company boasts the highest dividend yield (2.1%). The company also stands out in terms of its Price/Earnings to Growth ratio, which is second in the industry. Tiffany’s long-term growth rate is fifth highest, its earnings growth is sixth highest and its return on equity is eight highest. Sales growth comes in at No. 11.
This company’s main competitors are privately-held Harry Winston Inc., VMH Moët Hennessy Louis Vuitton SA, and Compagnie Financière Richemont SA.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. Unfortunately this company’s fundamentals have deteriorated in recent months, as has its buying pressure. Currently, Tiffany’s only shines in terms of its analyst earnings revisions track record and its return on equity. Sales growth, earnings growth and operating margin growth are all C-rated and the company even earns an F in terms of its track record of beating earnings estimates. This stock receives a C for its Quantitative Gradae and a C for its Fundamental Grade.
Especially considering its lackluster first-quarter earnings announcement, I recommend that you hold off on buying this stock for now.
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