Weak Holiday Sales at Tiffany

Tiffany & Company ( TIF - Analyst Report ) came up with soft holiday sales numbers as macroeconomic headwinds continue to offset the company’s positives.

Results were at the lower end of management’s expectations as comparable-store sales (comps) for the two months period ended Dec 31, 2012, remained flat. On a constant-currency basis, comps remained flat compared with a 1% increase in the comparable prior-year period. Total worldwide net sales marked an increase of 4% to $992 million during the period.

When compared to its peers, Zale Corporation ( ZLC - Snapshot Report ) and Signet Jewelers Limited ( SIG - Snapshot Report ) , Tiffany seems to be losing market share as Zale witnessed a 2.3% increase in its comps, while Signet marked a 3.3% rise in comps for the period under review.

Region wise, net sales in Americas increased 3% (2% in constant currency) to $516 million, comps however, marked a decline of 2%. Sales from Internet and catalog rose 4% during the period.

Net sales in Europe increased 2% to $119 million, while comps declined 1%. On a constant-currency basis, net sales increased 2% and comps remained flat during the period.

Asia-Pacific region marked an increase of 13% in net sales to $187 million, while comps increased 10% during the period. On a constant-currency basis, net sales increased 11%, while comps rose by 7%.

Net sales came in at $153 million in Japan, down 5% year over year, while comps declined by an equal magnitude. On a constant-currency basis, both net sales and comps increased 1%. Other sales, which include wholesale sales of end goods to independent distributors and wholesale sales of rough diamonds, more than doubled to $17 million during the period.

Following soft holiday sales, the company now expects fiscal 2012 earnings to be at the lower end of its previously announced forecast of $3.20 – $3.40 per share. The current Zacks Consensus Estimate stands at $3.25 per share for fiscal 2012.

Tiffany holds a dominant position in the world jewelry market due to its distinctive brand appeal and large geographic reach. Going forward, the company intends to expand its distribution network by adding stores in both new and existing markets and expects net earnings to mark an increase of 6% to 9% in fiscal 2013.

As of December 31, 2012, Tiffany operated 274 stores including, 115 in the Americas, 65 in Asia-Pacific, 55 in Japan, 34 in Europe and 5 in the U.A.E.

Currently, we maintain our long-term Underperform recommendation on the stock. Moreover, shares of Tiffany hold a Zacks Rank #5 (Strong Sell).