Tiffany & Co. (TIF), A Great China Boom Play

by Jim Woods | November 25, 2009 10:11 am

Luxury-jewelry retailer Tiffany & Co. (TIF[1]) gave investors a pre-Thanksgiving Day present Wednesday morning as it posted better-than-expected third-quarter profits. The company earned $43.3 million, or 33 cents per share on an adjusted basis. That number easily bested the consensus forecast for earnings of 24 cents per share.

More importantly, Tiffany & Co. raised its full-year outlook, saying that sales for the fourth quarter should rise by a mid-single-digit percentage. Its new full-year profit forecast is now $1.88 to $1.98 per share, well above the previous guidance of $1.65 to $1.75 per share and much better than the $1.78 per share forecast by analysts. As expected, TIF shares surged in early Wednesday trade.

Digging into Tiffany & Co.’s earnings statement, the real growth fueling the retailer’s quarterly sales came from outside the United States. In fact, the company said third-quarter rate of sales declines in the U.S. declined, while sales in Asia and Europe increased much more than the company anticipated.

It’s this global demand that makes TIF shares attractive here, and the fountainhead of that global demand comes from China. The company reportedly has plans to triple the number of stores it operates in China over the next five years, which is an outstanding move given that Tiffany’s Asia sales rose 10% to $225.8 million in the third quarter.

And despite the fact that TIF shares are up over 100% in the past 12 months, there’s a lot of room for this stock to grow, especially given the potential earnings growth stemming from the China boom[2]. TIF is one high-priced luxury stock[3] worth every penny. 

TIF stock chart

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