Post Earnings Coverage as Tiffany Bottom Line Tops Expectations

LONDON, UK / ACCESSWIRE / August 31, 2016 / Active Wall St. announces its post-earnings coverage on Tiffany & Co. (NYSE: TIF). The company announced its second quarter fiscal 2016 (Q2 FY16) and first six months (H1 FY16) earnings on August 25th, 2015. The luxury jewelry retailer reported a 1.0% y-o-y growth in its net earnings in Q2 FY16, primarily on higher gross margins. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Numbers

During the reported quarter, Tiffany reported net sales of $931.6 million which was 6% lower than $990.5 million recorded in prior-year period and marginally below market expectation of $933.0 million. The company’s GAAP diluted net earnings improved to $105.7 million, or $0.84 per share, in the second quarter of fiscal 2016, from $104.9 million, or $0.81 per share, in the corresponding period of fiscal 2015. The market had expected the company to report GAAP diluted net earnings of $0.71 per share.

However, Tiffany’s non-GAAP diluted net earnings in Q2 FY16 declined 5% on y-o-y basis from $111.2 million, or $0.86 per share, in the year ago period.

For H1 FY16, the company’s Worldwide net sales fell 7% on y-o-y basis to $1.82 billion while, comparable store sales declined 9% on y-o-y basis. Tiffany’s GAAP net earnings for first half of fiscal 2016 stood at $193.2 million, or $1.53 per diluted share, versus $209.7 million, or $1.62 per diluted share, in the comparable prior year period.

Additionally, the jewelry designer and retailer’s gross margin improved to 61.9% in Q2 FY16 from 59.9% in the comparable prior year quarter. Tiffany’s gross margin for H1 FY16 also improved to 61.6% from 59.5% in H1 FY 15. The company attributed this improvement to lower input costs and various steps undertaken by the company to optimize product sales mix and increase in pricing of products.

“The global environment continues to reflect well known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists, especially from China,” said Tiffany’s Chief Executive Officer Frederic Cumenal in his statement, “We are managing expenses efficiently.”

In Q2 FY 15, Tiffany inaugurated four company-owned stores whereas it pulled shutters on one at an existing location. The company has self-operated 311 stores as on July 31, 2016, of which 125 are in Americas, 83 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE.

Region-Wise

Tiffany’s total sales in the Americas were $434 million in Q2 FY16 and $837 million in H1 FY16, both lower by 9% on y-o-y basis from their corresponding prior year period. Furthermore, the comparable Americas store sales during Q2 FY16 and H1 FY16 declined 9% and 10%, respectively.

In the Asia-Pacific region, total sales were down 6% on y-o-y basis to $230 million in Q2 FY16 and 7% on y-o-y basis to $469 million in H1 FY16. The company’s sales growth in China and Korea was offset by significant decline in the Hong Kong market and moderate declines in most other markets.

In Q2 FY16, total sales in Europe fell 12% on y-o-y basis to $111 million, due to a 17% y-o-y decline in comparable store sales. Additionally, the company witnessed an 11% y-o-y decline in its total sales to $208 million in H1 FY16, attributable to a 16% y-o-y in comparable store sales in the reported period.

For Tiffany, Japan was a silver lining where total sales grew 10% on a y-o-y basis to $138 million in Q2 FY16 and 9% on y-o-y basis to $269 million in H1 FY16, primarily due to comparable store sales growth of 13% and 12% in the respective periods.

Balance Sheet and Cash Flows

As on July 31, 2016, net inventories were $2.32 billion, down 1% on a y-o-y basis from $2.36 billion as on July 31, 2015. Tiffany made capital expenditures of $101 million in H1 FY16, marginally above $98 million incurred during H1 FY15.

Additionally, the company cash and cash equivalents and short-term investments amounting to $720.1 million as on July 31, 2016, compared to $771.4 million recorded as on July 31, 2015.

Share Repurchases

Tiffany repurchased 1.1 million shares of its common stock for an average cost of $63 per share approximately during the reported quarter. Additionally, the company has bought back 12.3 million shares at an average price of $65 per share approximately during the first half of fiscal 2016.

On July 31, 2016, Tiffany still has $344 million remaining under its $500 million common stock repurchase program that ends on January 31, 2019.

Earnings Outlook

The company’s management has retained its full year earnings guidance for fiscal 2016 and expects worldwide net sales to decline to a low single-digit percentage from fiscal 2015. They also anticipate earnings per diluted share to fall by a mid-single-digit percentage from fiscal 2015 with adjusted earnings per diluted share to be $3.83.

Stock Performance

Tiffany’s shares ended 1.37% lower finishing the trading session at $71.98 on August 30, 2016. The stock recorded a total volume of 2.11 million shares, which was higher than its 3 months average volume of 2.09 million shares. In the last one month and the previous three months, the company’s share price has gained 13.02% and 16.33%, respectively. Currently, the stock traded at a P/E ratio of 20.67.

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