Tiffany (TIF) Up 49% In One Year, Can The Bull Run Continue?

Tiffany & Co. (NYSE:TIF) had a tremendous run in the past one year as the stock has returned 48.8%. In fact, the company’s shares have outpaced the Zacks categorized Retail-Jewelry Stores industry, which has gained 13%. The company’s omni-channel platform, store expansion plans, tapping of new markets and venturing into new revenue generating areas has facilitated it to outperform the industry. However, the company’s dismal performance in Japan, Americas and Europe and currency fluctuations remain primary hindrances for the stock at the moment.

Hidden Catalyst

Tiffany is well positioned to augment its top-line and bottom-line performance in the long run by leveraging capital investments made in the last several years in distribution, manufacturing and diamond sourcing processes. The company is also looking at other revenue generating avenues, and this includes expansion of its watch business.

The company also intends to expand distribution network by adding stores in both new and existing markets. With about half of the total sales generated internationally, we believe that the company is well diversified from a regional perspective as well. The company’s long-term objective is to attain ROA of at least 10% and ROE of at least 15%, as notified earlier.

The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn boosts store productivity. Tiffany concentrates on improving sales per square foot through an increase in customer traffic and converting them into potential buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.

Hurdles to Cross

Decline in sales in Americas and Europe has been a major concern for the company in the past few quarters. Sales in Americas and Europe have declined for five straight quarters now, with 3% drop recorded for each region in first-quarter fiscal 2017. Further, it reported 3%, 2%, 9% and again 9% decline in the fourth, third, second and first quarters of fiscal 2016, respectively. Maintaining the same chronological order we noted that sales in Europe declined 7%, 10%, 12% and 9%, respectively.

Tiffany generates a significant amount of net sales outside the U.S. Due to high exposure to international markets the company remains prone to currency fluctuations. The weakening of foreign currencies against the U.S. dollar may require the company to either raise prices or contract profit margins in locations outside of the country

Tiffany currently carry a Zacks rank #3 (Hold).

Stock to Consider

Better-ranked stocks worth considering in the retail space include Aaron's, Inc. (NYSE:AAN) , Best Buy Co., Inc. (NYSE:BBY) and The Children's Place, Inc. (NASDAQ:PLCE) . All these three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aaron's has reported better-than-expected earnings in the trailing four quarters, with an average beat of 10.6%.

Best Buy has an impressive long-term earnings growth rate of 11.8% and has also surpassed the Zacks Consensus Estimate in the preceding four quarters, with an average earnings beat of 33.8%.

The Children's Place has reported earnings beat in the last four quarters, with an average of 36.6%.

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