Tiffany Stock Set for a Holiday Season Sparkle

Advertisement

As the global economy continues to recover, consumer discretionary companies that specialize in upscale products are benefiting from a rise in wealthy and upper-middle class spending. Tiffany & Co. (TIF) epitomizes that category of luxury company — and luxury spending is on a tear.

tiffany-stock-earnings

Tiffany & Co designs, manufactures and retails jewelry and other luxury goods around the world. In addition to its retail stores worldwide, Tiffany also conducts direct selling through the Internet and catalogs, as well as business gift programs.

In a report released in October, the consultancy Bain & Co predicted that total revenue from the personal luxury goods industry, which includes jewelry, watches, clothes, shoes and leather goods, will reach $282.7 billion in 2014, compared to $270 billion in 2013. Bain expects that figure to grow year-over-year by 5% in 2015, which is good news for Tiffany stock.

Tiffany Stock Earnings

Tiffany stock already shows luster. Today before the markets opened, Tiffany & Co reported adjusted earnings of 76 cents per share of Tiffany stock. Revenue came in at $960 million, compared to EPS of 73 cents on revenue of $911 million in the same period a year ago.

These operating results fell short of Wall Street estimates for EPS of 77 cents on $969 million in revenue, but there was sanguine news in the earnings report that should cheer investors.

Worldwide same-store sales posted a robust increase of 6% (on a constant-exchange-rate basis), driven by a rise of 11% in the Americas and 2% in Europe. Same-store sales in the quarter were mostly dragged down by a 6% decline in Japan, as the Land of the Rising Sun sinks back into recession. Future sales in the rest of the world appear promising enough for management to reiterate its full-year EPS guidance of $4.20-$4.30.

To be sure, these third-quarter results are mixed, but there’s plenty of reason to remain bullish on Tiffany stock. The company still plans to open 10 new stores, an expansion that it can finance with sturdy free cash flow of about $400 million. These new openings include four in the Americas, two in the Asia-Pacific region, two in Japan, and one each in Europe and Russia.

EPS growth in the third quarter remained strong; the dip in revenue can be attributed to headwinds in Japan that should be more than mitigated by the forthcoming holiday season and accelerating recovery in North America and China.

TIF Stock: In The Lap of Luxury

Meanwhile, the vast market of China will remain a crucial driver of Tiffany stock over the long haul. Indeed, despite China’s uneven growth, Tiffany’s third quarter revenue in the Middle Kingdom still managed to post a year-over-year increase of 2%, an impressive resilience that’s an auspicious sign for future quarters in China.

Consumers on the Chinese mainland have a huge appetite for luxury brands. According to the Bain report, Chinese consumers represent the largest and fastest growing nationality for luxury goods. Despite the vicissitudes of China’s GDP growth, the country’s penchant for excess won’t dissipate anytime soon, putting Tiffany stock in the lap of luxury in the world’s second-biggest economy.

Rising spending on luxury goods, especially in the world’s growth engine of China, combined with recovery in North America will put a sparkle on the famous Tiffany brand this holiday season and beyond.

As of this writing, John Persinos did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2014/11/tiffany-stock-earnings/.

©2024 InvestorPlace Media, LLC