Tiffany (TIF) Stock Shines On Q2 Earnings Beat, View Intact

Tiffany & Co. (NYSE:TIF) posted fifth straight quarter of positive earnings surprise, when it reported second-quarter fiscal 2017 results. This designer and retailer of fine jewelry posted quarterly earnings of 92 cents a share that beat the Zacks Consensus Estimate of 88 cents and increased nearly 10% from the year-ago period on account of higher sales and improved operating margin.

Net sales came in at $959.7 million, up 3% from $931.6 million recorded in the prior-year quarter and came ahead of the Zacks Consensus Estimate of $933.2 million. The company registered sturdy wholesale sales of diamonds, higher wholesale sales in the Asia-Pacific region and robust e-commerce sales growth. Comparable-store sales (comps) declined 2%. In constant currencies, worldwide net sales jumped 4%, while comps decreased by 1%.

Tiffany’s omni-channel platform, store expansion programs, tapping of new markets and venturing into new revenue generating avenues bode well for the stock. Following the results, shares are up roughly 3% during pre-market trading hours. So far in the year, the company’s shares have increased 14.6% compared with the industry’s decline of 9.9%.

Another jewelry retailer, Signet Jewelers Limited (NYSE:SIG) reported robust financial numbers in the second quarter. The company’s earnings of $1.33 per share beat the Zacks Consensus Estimate of $1.10 and increased sharply from $1.06 reported in the year-ago quarter. Signet’s shares are up 16% during pre-market trading hours.

Let’s Delve Deep

By geographic segments, sales in the Americas climbed 1% to $439 million, while comps declined by an equivalent rate. Sales in the Asia-Pacific region rose 2% to $235 million, while comps fell 7%. Sales in Japan jumped 1% to $140 million and comps grew 3%, and sales in Europe came in at $114 million, up 3% but comps decreased by 2%. Other sales came in at $32 million, up 74%, while comps tumbled 8%.

Gross margin expanded 40 basis points to 62.3% during the quarter on account of favorable product input costs and high margin fashion jewelry products, partially offset by rise in wholesale sales of diamonds. Operating margin increased 10 basis points to 18.9%.

Tiffany & Co. Price, Consensus and EPS Surprise

Tiffany & Co. Price, Consensus and EPS Surprise | Tiffany & Co. Quote

Store Update

In the first half of fiscal year, Tiffany has opened three stores and shuttered four locations. As of Jul 31, 2017, the company operated 312 stores (124 in the Americas, 85 in Asia-Pacific, 54 in Japan, 44 in Europe, and five in the U.A.E.). Management now anticipates gross retail square footage growth of 2% via 10 openings, seven relocations and seven closings.

Other Financial Details

Tiffany, which carries a Zacks Rank #3 (Hold), ended the quarter with cash and cash equivalents and short-term investments of $1,043.5 million, and total short-term and long-term debt of $1,116.1 million, reflecting 35% of shareholders equity.

During the quarter, the company repurchased approximately 230,000 shares at an average cost of about $91 per share. As of Jul 31, 2017, the company had $278 million remaining under its $500 million buyback program that run through Jan 31, 2019.

Management anticipates capital expenditures of $250 million and expects to generate free cash flow of approximately $450 million during fiscal 2017.

Guidance

Management continues to anticipate fiscal 2017 earnings per share to increase by a high-single-digit percentage from fiscal 2016 earnings of $3.55. However, it expects earnings to jump mid-single-digit-percentage over adjusted earnings of $3.75 per share reported in fiscal 2016. Tiffany now envisions fiscal year net sales to increase by a low-single-digit percentage on a reported and constant-exchange-rate basis.

Want to Know About the Gems in the Retail Space?

Investors looking for better-ranked stocks in the retail space may consider The Children's Place, Inc. (NASDAQ:PLCE) and Burlington Stores, Inc. (NYSE:BURL) . Children's Place sports a Zacks Rank # 1 (Strong Buy), while Burlington Stores carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Children's Place delivered an average positive earnings surprise of 16.3% in the trailing four quarters and has a long-term earnings growth rate of 9%.

Burlington Stores delivered an average positive earnings surprise of 22.6% in the trailing four quarters and has a long-term earnings growth rate of 15.9%.

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