A month has gone by since the last earnings report for Tiffany . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Tiffany due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Tiffany’s Q3 Earnings Top Estimates, Online Sales Surge
Tiffany & Co. came out with its third-quarter fiscal 2020 results, wherein both the top and the bottom lines came ahead of the Zacks Consensus Estimate. While quarterly earnings improved year over year driven by prudent cost management, net sales declined from the year-ago period. Nonetheless, the rate of sales decline decelerated sharply on a sequential basis. We note that strong sales in Mainland China and sturdy e-commerce business aided the upbeat performance.
Let’s Introspect
This designer, manufacturer and retailer of jewelry posted adjusted earnings of $1.11 per share that surpassed the Zacks Consensus Estimate of 75 cents. The figure showcased an increase of 73% year over year owing to higher gross and operating margins, and a lower effective income tax rate.
Worldwide net sales decreased 1% year over year to $1,008.2 million but marginally topped the Zacks Consensus Estimate of $1,006 million. Markedly, the rate of decline has decelerated from 29% witnessed in the preceding quarter. Again, comparable sales rose 3% during the quarter under review. This followed a decline of 24% in the preceding quarter. On a constant-exchange-rate basis, net sales declined 2% but comparable sales grew 1% from the prior year.
Impressively, sales in Mainland China increased by more than 70% with comparable sales nearly doubling during the period. Tiffany’s e-commerce business displayed strength. E-commerce sales soared 92% worldwide during the quarter under review. The company also registered increase in another key metric — average unit retail price — in the quarter. In addition, Tiffany T1 line, its newest gold and gold with diamonds jewelry collection, continued to glitter.
Gross margin expanded 210 basis points to 63.8% primarily due to a change in sales mix to higher margin products. Again, operating margin increased 470 basis points to 16.4%.
Meanwhile, CEO, Alessandro Bogliolo said, “We look forward to surprising and delighting our consumers during the holiday season and the successful completion of the merger transaction with LVMH in early 2021.” Markedly, management envisions a mid-single-digit percentage decline in total net sales for the fourth quarter. Nonetheless, it anticipates a low-double-digit percentage increase in operating earnings and a high-single-digit percentage increase in earnings per share for the final quarter.
Segment Details
Geography-wise, net sales in the Americas dropped 16% to $354 million, while comparable sales declined 15%. Sales decreased across most of the region due to fall in foreign tourism on account of the COVID-19 pandemic.
In the Asia-Pacific region, net sales surged 30% to $382 million, while comparable sales climbed 40%. We note that robust retail sales increase in Mainland China and Korea was partly offset by mixed performance across other markets in the region.
In Japan, net sales declined 8% to $156 million, while comparable sales slid 4%. Management stated that fall in foreign tourism in the region and strong growth in the last year because of increased consumer demand prior to the consumption tax increase, which occurred on Oct 1, 2019, resulted in decline during the quarter under review.
In Europe, net sales decreased 6% to $104 million, while comparable sales fell 6%. Sales decreased across most of the region owing to decline in foreign tourism on account of the ongoing crisis.
Other net sales fell 30% to $12 million due to decreases in sales within the Emerging Markets region.
Sales for jewelry categories were as follows — Jewelry Collections grew 7%, while both Engagement Jewelry and Designer Jewelry decreased 6%.
Store Update
During the first nine-month period of fiscal 2020, Tiffany opened two company-operated stores and closed eight. As of Oct 31, 2020, the company operated 320 stores — 122 in the Americas, 87 in Asia-Pacific, 59 in Japan, 47 in Europe, and five in the UAE.
Other Financial Details
Tiffany ended the quarter with cash and cash equivalents and short-term investments of $1,145.7 million and total debt (short-term borrowings and long-term debt) of $1,431.1 million, reflecting 44% of stockholders’ equity compared with 31% in the year-ago period. This increase was due to $500 million drawdown on the revolving credit facility during the first quarter, which remained outstanding at Oct 31, 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.04% due to these changes.
VGM Scores
Currently, Tiffany has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Tiffany has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Image: Bigstock
Why Is Tiffany (TIF) Down 0.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Tiffany . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Tiffany due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Tiffany’s Q3 Earnings Top Estimates, Online Sales Surge
Tiffany & Co. came out with its third-quarter fiscal 2020 results, wherein both the top and the bottom lines came ahead of the Zacks Consensus Estimate. While quarterly earnings improved year over year driven by prudent cost management, net sales declined from the year-ago period. Nonetheless, the rate of sales decline decelerated sharply on a sequential basis. We note that strong sales in Mainland China and sturdy e-commerce business aided the upbeat performance.
Let’s Introspect
This designer, manufacturer and retailer of jewelry posted adjusted earnings of $1.11 per share that surpassed the Zacks Consensus Estimate of 75 cents. The figure showcased an increase of 73% year over year owing to higher gross and operating margins, and a lower effective income tax rate.
Worldwide net sales decreased 1% year over year to $1,008.2 million but marginally topped the Zacks Consensus Estimate of $1,006 million. Markedly, the rate of decline has decelerated from 29% witnessed in the preceding quarter. Again, comparable sales rose 3% during the quarter under review. This followed a decline of 24% in the preceding quarter. On a constant-exchange-rate basis, net sales declined 2% but comparable sales grew 1% from the prior year.
Impressively, sales in Mainland China increased by more than 70% with comparable sales nearly doubling during the period. Tiffany’s e-commerce business displayed strength. E-commerce sales soared 92% worldwide during the quarter under review. The company also registered increase in another key metric — average unit retail price — in the quarter. In addition, Tiffany T1 line, its newest gold and gold with diamonds jewelry collection, continued to glitter.
Gross margin expanded 210 basis points to 63.8% primarily due to a change in sales mix to higher margin products. Again, operating margin increased 470 basis points to 16.4%.
Meanwhile, CEO, Alessandro Bogliolo said, “We look forward to surprising and delighting our consumers during the holiday season and the successful completion of the merger transaction with LVMH in early 2021.” Markedly, management envisions a mid-single-digit percentage decline in total net sales for the fourth quarter. Nonetheless, it anticipates a low-double-digit percentage increase in operating earnings and a high-single-digit percentage increase in earnings per share for the final quarter.
Segment Details
Geography-wise, net sales in the Americas dropped 16% to $354 million, while comparable sales declined 15%. Sales decreased across most of the region due to fall in foreign tourism on account of the COVID-19 pandemic.
In the Asia-Pacific region, net sales surged 30% to $382 million, while comparable sales climbed 40%. We note that robust retail sales increase in Mainland China and Korea was partly offset by mixed performance across other markets in the region.
In Japan, net sales declined 8% to $156 million, while comparable sales slid 4%. Management stated that fall in foreign tourism in the region and strong growth in the last year because of increased consumer demand prior to the consumption tax increase, which occurred on Oct 1, 2019, resulted in decline during the quarter under review.
In Europe, net sales decreased 6% to $104 million, while comparable sales fell 6%. Sales decreased across most of the region owing to decline in foreign tourism on account of the ongoing crisis.
Other net sales fell 30% to $12 million due to decreases in sales within the Emerging Markets region.
Sales for jewelry categories were as follows — Jewelry Collections grew 7%, while both Engagement Jewelry and Designer Jewelry decreased 6%.
Store Update
During the first nine-month period of fiscal 2020, Tiffany opened two company-operated stores and closed eight. As of Oct 31, 2020, the company operated 320 stores — 122 in the Americas, 87 in Asia-Pacific, 59 in Japan, 47 in Europe, and five in the UAE.
Other Financial Details
Tiffany ended the quarter with cash and cash equivalents and short-term investments of $1,145.7 million and total debt (short-term borrowings and long-term debt) of $1,431.1 million, reflecting 44% of stockholders’ equity compared with 31% in the year-ago period. This increase was due to $500 million drawdown on the revolving credit facility during the first quarter, which remained outstanding at Oct 31, 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.04% due to these changes.
VGM Scores
Currently, Tiffany has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Tiffany has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.