The fashion jewelry maker in the U.S., Tiffany (TIF, Financial), surprised the Street on last Wednesday by posting better than expected sales and earnings in its first quarter amid looming uncertainties in the U.S. economy. While the GDP growth in the past three months in the U.S was nominal with it improving by only 0.2% year-over-year, the retail sales in the month of April were flat as per the Commerce Department. In such a persisting scenario Tiffany posted satisfactory numbers that surpassed the Street expectations. Let’s quickly have a snapshot at the first quarter earnings of Tiffany.
The quarter numbers
The revenue for the quarter stood at $962.4 million which was a 5% drop on a year-over-year basis, but much better than the analysts’ estimates of $918.7 million. Though the retail sales trend in the U.S. continues to be tepid Tiffany’s T line of Fashion jewelry performed well and aided to boost its sales in the home turf and in Europe. However, the strong U.S. dollar reduced the topline earnings in the international markets. It is to be noted that even in the U.S. where almost 25% of Tiffany’s U.S. sales depends on international tourists as per the Wall Street Journal, the sales chart took a hit and had to bear the brunt of the strong U.S. currency which impeded the buying intensity by tourists at home.
Nevertheless, on a constant currency basis, sales across the globe saw positive growth except for Japan. The sales in Europe jumped almost 21% year-on-year while in Americas the sales saw a 3% rise. But considering the surge noticed in the U.S. dollar against all other major currencies, Tiffany’s worldwide comparable sales dropped 7% in the fiscal first quarter.
Lower revenue earned during the quarter negatively affected the net income of the jewelry retailer that came at $104.9 million, or $0.81 per share, down by a whopping 17% compared on a year-over-year basis, but exceeding the Wall Street’s estimate of $0.70 a share for the quarter. Interestingly the drop in comparable store sales was also 2% less than the Street expectations that was hooked to a 9% drop.
Headwinds likely to continue
The strong U.S. dollar is expected to gain momentum in the pursuant quarters and hence the management has taken a cautious stand with regard to their full-year outlook. The management now expects the net earnings per diluted share to grow marginally from $4.20 per share earned excluding charges in fiscal 2014.
As Tiffany and other luxury retailers continue to operate in a difficult environment as dollar continues to gain strength, the management has indicated during the earnings call that it would look at expansion of its existing jewelry collections by introducing new stores and including new designs in the key markets it operates in. In fact, Tiffany hopes to reinforce its position as a global luxury brand in the coming years through such a venture.
To conclude
As the stock sparkled and took a positive surge after the earnings release, investors are happy that their money looks secure at this current juncture. As Tiffany topped the analysts’ expectations on the top and bottom line estimates during the first quarter, analysts are noting that the luxury retailer’s jewelry segments performed well in almost all the geographies. Let’s stay tuned and keep an eye on how Tiffany performs in the upcoming quarters as the rise in sales obviously adds to the confidence of its investors.
