Tiffany's net sales for the November-December period fell 1% from the prior year to $1.02 billion. On a constant currency basis, sales rose 3% over the two months, while comparable-store sales growth was flat from the prior year, the company said.
The company lowered its annual EPS guidance to a range of $4.15 to $4.20, excluding a charge related to the extinguishment of long-term debt. Its fiscal year ends on Jan. 31. Tiffany had previously forecast annual EPS between $4.20 and $4.30. Analysts had pegged Tiffany's full-year earnings at $4.31 a share.
"Tiffany has meaningful global opportunities to pursue over the long-term. For the coming year, however, we are planning cautiously as we anticipate significant headwinds from the stronger U.S. dollar against all of our key currencies that, as we experienced in the holiday period, negatively affects both the translation of results and sales to tourists in the U.S.," Tiffany President Frederic Cumenal said in a statement. "While we are still in our planning process, we believe these factors will likely result in our planning low-to-mid single-digit sales and earnings growth in 2015. Despite these and other global economic pressures that we anticipate in the short-term, we believe that, when they abate, Tiffany will resume higher earnings growth rates based on stronger sales growth and increasing operating margins."
Shares were down 12.8% to $90.30. Here's what analysts said.
David Schick, Stifel (Buy; $120 PT)
This morning TIF reported worldwide holiday 2014 comp of flat versus our +4% 4Q14 model and +3.9% consensus but fashion and T collection product likely helped margin.
We believe strong US$ hurt global translation and U.S. business to foreign tourists ... management expects these impacts to continue ... while we expect shares to get hit today we do not see any change in core TIF fundamentals or brand and therefore expect any weakening of US$ would be beneficial as investors can look past pressure.
Ike Boruchow, Sterne Agee (Buy; $110 PT)
In contrast to a strong Q3 (comps +11%), the Americas posted a 1% comp decline for holiday (-2% after accounting for FX), representing a significant deceleration on the top line. While the highly visible Tiffany "T" campaign (the first from the new design team) is delivering strong growth in the fashion gold jewelry category, the increased exposure is not generating broader sales growth across the brand. Management also believes that the strengthening U.S. dollar is adversely affecting tourist spending domestically. Also, given how strong Q3 was, it is possible that there was some pull-forward of sales out of Q4.
Lowering Estimates/PT, Still See Reasons for Optimism. We now project Q4/FY14/FY15 EPS of $1.52/$4.20/$4.48 (from $1.56/$4.24/$4.75), and our 12-month PT of $110 (from $121) is based on 21-22x our 2016 EPS estimate of $5.10 (from $5.50). Although holiday sales performance was undoubtedly disappointing, we continue to see reasons to like this stock. The strong performance to the "T" collection bodes well for future collections from the new design team and is helping to reinvigorate the long-slumping fashion category. Given that fashion is TIF's highest-margin category, improvement in this business presents favorable product-mix dynamics going forward. Also, we believe that commodity cost deflation will remain a net benefit to the company through 2016, insulating the earnings stream somewhat from fluctuations on the top line. Thus, while FX is clearly a headwind, we also see compelling growth opportunities here.
Oliver Chen, Cowen & Co. (Outperform; $123 PT)
TIF reported disappointing holiday results with overall net sales down -1%, but up +3% C/C & flat comps due to significant variability in performance by region & product category. We were encouraged by strong growth in Asia & cont'd improvement in Europe, however FX headwinds dampened overall results. Tiffany T drove solid growth in fashion gold jewelry, but same momentum did not carry through to other jewelry categories as anticipated. Despite near-term FX headwinds, we continue to believe in TIF's long-term growth potential and reiterate our Outperform rating with a PT of $123 on ~22x our 2016E EPS estimate.
Christian Buss, Credit Suisse (Neutral; $97 PT)
We are increasingly cautious after Tiffany & Co announced disappointing holiday sales, with comparable store sales flat Y/Y versus consensus estimates for 4.4% Y/Y. We believe benefits from prior tailwinds including 1) Favorable commodity costs; 2) Outsized APAC growth; and 3) Strength in North America are beginning to erode. Global demand looked to be especially challenging over the holiday period with Americas' constant currency comps declining 1% Y/Y and APAC constant currency comps currently up 1.5% Y/Y versus up 9.1% Y/Y in 2013 on a combined 3Q/4Q basis. With demand tepid and TIF's 2015 outlook below expectations (sales and earnings growth likely up low to mid-single digits), we remain cautious on shares near-term. We reiterate our Neutral rating and lower our estimates and Target Price to $97 from $108.
Brian Nagel, Oppenheimer (Outperform; $109 PT)
We look upon the weaker than expected holiday (Nov./Dec.) sales and updated guidance that TIF reported today as disappointing. Total company constant currency comps were flat in Nov./Dec. compared with a Street figure of about +4%. A seemingly solid initial showing for Tiffany T and some regional strength was not enough to offset overall sales sluggishness in the US and Japan. We have long recommended TIF as one of the best run and most dominant brands in retail. Today's announcement does not dent our favorable longer-term outlook for TIF. We look upon management's initial guidance for 2015 as appropriately conservative and potentially conducive to revisions higher in coming quarters. Our rating on TIF remains Outperform.
TheStreet Ratings team rates TIFFANY & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate TIFFANY & CO (TIF) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.9%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for TIFFANY & CO is rather high; currently it is at 64.44%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.98% trails the industry average.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- TIFFANY & CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TIFFANY & CO reported lower earnings of $1.40 versus $3.25 in the prior year. This year, the market expects an improvement in earnings ($4.31 versus $1.40).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: TIF Ratings Report