Back in January, I was optimistic Tiffany (TIF - Get Report) shares could continue to sparkle. Tiffany is undergoing a turnaround, but what's in store when it reports on Friday?

In the last 52 weeks, shares of Tiffany are up 23%. The stock has increased 14.5% this year alone. However, TIF recently backed off its 52-week high after the company caught a few analyst downgrades.

Tiffany has made some drastic changes in the last few months. After poor holiday sales, the company replaced its CEO Frederic Cumenal. Chairman Michael Kowalski -- Tiffany's former longtime CEO -- will take over the job until a replacement is found.

Then design director Francesca Amfitheatrof, the only female design director in Tiffany's history, resigned after three years.

Right after that, Tiffany announced that Reed Krakoff had been hired as Chief Artistic Officer, effective Feb. 1. Krakoff will design jewelry, luxury accessories and be responsible for all imagery, including that used in stores, e-commerce and advertising. He was previously chief designer for Coach (COH) and has no experience designing jewelry.

I was surprised by the change since Amfitheatrof is a trained jeweler and has a blockbuster jewelry design resume. Tiffany reportedly spent a year wooing her to the brand.

In October, Tiffany hired Mark Erceg as Chief Financial Officer to get a handle on costs. Erceg told investors his focus would be on reducing expenses, especially selling, general and administrative expenses.

Tiffany has also taken steps to revive its fashion jewelry category. The company wants to launch new products faster and better manage inventory. The company has been shifting its mix toward higher-margin products such as fashion jewelry and also expanding the number of its offerings below $500 in the silver jewelry department.

Management will turn its focus to fixing its gold collection later this year. Statement jewelry, which contains Tiffany's highest-priced offerings, continues to be weak. In fiscal year 2017 (ending January 2018), the company will introduce a home and gift accessory collection.

Tiffany will report fourth-quarter fiscal 2016 results on Friday. Analysts are expecting earnings of $1.38 per share on revenue of $1.21 billion. For the full year, Wall Street is looking for total revenue of $3.99 billion and EPS of $3.66.

If the company hits those targets, revenue would be down about 2.6% year over year and earnings would slip about 4%. Recall, earnings fell 8.8% last year because of higher expenses and lower margins.

Gross margins are expected to be up 128 basis points to 62%, but operating income to be down 116 basis points because SG&A spending continues to move higher.

For the first quarter of fiscal 2017, analysts are expecting revenue of around $900 million, largely flat with the previous year, and EPS of $0.69. Gross margins are expected to be up 25 points.

While gross margins are rising, Tiffany needs a mid-single-digit same-store sales increase to leverage its fixed expenses and drive earnings. That's why the stock is catching analyst downgrades. Nobody thinks the company can do it.

I'm also skeptical Tiffany can drive mid-single-digit comps only a few months after a new design director has been hired. It's going to take months for Krakoff's designs to hit the market and many of the easy expense reductions have already taken place.

Realistically, earnings are not likely to grow until late this year or early next year.

I am going to stay on the sidelines for the time being.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.