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Why the Downgrade?
Tiffany has witnessed sharp downward estimate revisions after reporting soft holiday sales numbers that prompted management to take a conservative stance on its future earnings. Results were at the lower end of management’s expectations. It seems that the company is at an unfavorable position as the challenging economy is taking away some of the sheen from this jewelry retailer.
On a constant-currency basis, total worldwide net sales for the two months period ended Dec 31, 2012, marked an increase of 4%, whereas comparable-store sales (comps) remained flat. We observe that the rate of growth of net sales and comps decelerated from 6% and 4%, respectively, registered during the two months period ended Dec. 31, 2011.
When compared to its peer, Zale Corporation (ZLC), Tiffany seems to be losing market share as Zale witnessed a 2.3% increase in its comps for the period under review.
Following soft holiday sales, Tiffany expects fiscal 2012 earnings to be at the lower end of the previously provided guidance range of $3.20 to $3.40 per share, when the company posted disappointing third-quarter fiscal 2012 results on Nov 29, 2012. The quarterly earnings of 49 cents a share missed the Zacks Consensus Estimate of 63 cents, and dropped sharply from 70 cents earned in the prior-year quarter.
The Zacks Consensus Estimate for the fourth quarter and fiscal 2012 dropped 3.5% and 1.5%, to $1.37 and $3.21 per share, respectively, over the past 7 days. Moreover, for the first quarter and fiscal 2013, the Zacks Consensus Estimate fell by 4.3% and 5.6% to 67 cents and $3.54 per share, respectively, over the same time frame.
Other Stocks to Consider
Not all jewelry retailers are performing as poorly as Tiffany. Signet Jewelers Limited (SIG - Snapshot Report) is expected to continue with its positive earnings surprise trend, andholds a Zacks Rank #2 (Buy). Other retail stocks that look promising are G-III Apparel Group, Ltd. (GIII - Snapshot Report) and Gildan Activewear Inc. (GIL - Snapshot Report), both of which hold a Zacks Rank #1 (Strong Buy).
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