Factors Likely To Decide Tiffany's (TIF) Fate In Q4 Earnings

Tiffany & Co. (NYSE:TIF) is slated to report fourth-quarter fiscal 2018 results on Mar 22. In the trailing four quarters, this designer, manufacturer and retailer of jewelry and other items has outperformed the Zacks Consensus Estimate by average of 14.1%. In the last reported quarter, the company delivered a positive earnings surprise of 1.3%.

How Are Estimates Shaping Up?

After witnessing a bottom-line decline of about 4% in the third quarter of fiscal 2018, Tiffany is likely to record year-over-year decrease of roughly 4.2% in the fourth quarter. The Zacks Consensus Estimate for the quarter under review is pegged at $1.60 compared with $1.67 reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. The Zacks Consensus Estimate for revenues is pegged at $1,341 million, up marginally from $1,334.3 million generated in the year-ago quarter.

For fiscal 2018, the Zacks Consensus Estimate for earnings is pegged at $4.67, reflecting an increase of approximately 13% year over year. For revenues, the consensus estimate stands at $4.46 billion.

Key Factors

Tiffany is well positioned to augment its top-line performance in the long haul by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. The company is also looking at other revenue generating avenues. It also intends to expand distribution network by adding stores in both new and existing markets.

The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn boosts store productivity. The company is gradually coming up with new jewelry designs, range of watches and fragrance. It has also introduced “build-your-own program” on its website under which customers are allowed to personalize their charm bracelets. Further, Tiffany is enabling customers to customize rings. That said, management envisions fiscal 2018 worldwide net sales growth of 6-7%, on a reported and constant currency basis.

Despite the company’s efforts to bolster the top line, rising SG&A expenses may dent operating margin. SG&A expenses may increase on account of higher spending on technology, marketing communications, visual merchandising, digital and store presentations. Management expects operating margin in fiscal 2018 to decline year over year, owing to a rise in SG&A costs. As a result, Tiffany expects fiscal 2018 earnings per share at the low end of its previously guided range of $4.65-$4.80.

Holiday Season Did Not Fare Well

Holiday Season, which coincides with the fourth quarter, did not fare well for Tiffany. The company’s worldwide net sales slipped 1% to $1.04 billion, while comparable sales declined 2%. Results were significantly impacted by reduced sales to foreign tourists and lower demand from local customers in Europe and Americas. However, robust sales growth was noted in mainland China and Japan, while the global e-commerce sales were also favorable during the season.

What’s the Probability of Earnings Beat?

Our proven model does not conclusively show that Tiffany is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tiffany has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Consequently, making surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Darden Restaurants (NYSE:DRI) has an Earnings ESP of +1.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PVH Corp. (NYSE:PVH) has an Earnings ESP of +1.14% and a Zacks Rank #3.

G-III Apparel (NASDAQ:GIII) has an Earnings ESP of +0.92% and a Zacks Rank #3.

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