Stock of the day 09/01/2015 – Tiffany & Co

World famous jewellers Tiffany & Co had an overall impressive 2014 that saw gains on the markets year on year as it entered 2015. However, with many stores having a tough December, Tiffany will reveal the extent of its Christmas success and failures with its own November-December 2014 holiday sales statement on Monday.

After a solid year of steady gains in 2013, Tiffany opened last year at $93.33 with shares prices quickly falling to its 2014 low in February at $80.39. The stock trudged along until May, where strong first quarter results and a 12% raise in quarterly dividends caused a 9% leap on the markets to $96.25. Prices stabilised higher around the $100 with an impressive second quarter, only to see these gains wiped out to hit $85.92 the market slump of mid-October. Since then Tiffany dusted itself off and began to rise once more, hitting its $110.55 2014 high in November after the third quarter results, and opening 2015 at $106.94.



These third quarter earnings were slightly lower than expectations, with earnings per share at £0.76 instead of the forecast $0.77, and revenue at $960 million rather than the predicted $970 million. However these figures still meant that Tiffany had seen a 5.3% growth in revenue for the quarter y/y, alongside 3 cent growth in EPS.

After this strong quarterly performance, CEO Michael Kowalski has been speaking about Tiffany’s position outside the USA. Kowalski sees Europe as a potentially lucrative venture for the company, despite the turbulence in the Eurozone economy; currently out of Tiffany’s 292 stores, only 39 are in Europe compared to 122 in the US. Kowalski pledged to expand this number, and Tiffany had already opened its first fully-owned Tiffany store in Russia, a risky move given the weakness of the rouble and the Russian economy as a whole.

Tiffany is also keen to expand further into an Asian market that is clamouring for jewellery; excluding Japan, 23% of Tiffany’s net sales come from Asia. Japan was a source of great joy for the company in early 2014, as sales grew by 20%; however, the introduction of a sales tax hike led to a 13% drop off in sales by the third quarter. Despite this, Kowalski remained confident of Tiffany’s position in the region.

Analysts have had a slightly mixed reaction to Tiffany & Co before its holiday sales statement. Keycorp downgraded the stock from ‘buy’ to ‘hold’, whilst Zacks gave it a rating of ‘neutral’ from ‘outperform’. However, out of 23 analysts polled, 14 gave a ‘buy’ rating, compared to only 9 for ‘hold’, arriving at an average target price of $104.77. Yet with stores having trouble over Christmas, it remains to be seen whether Tiffany’s diamonds are still a girl’s best friend.