Tiffany's Robust Holiday Sales Fails To Stimulate Stock

With retailers reporting sturdiest holiday sales growth since the end of the Great Recession, Tiffany & Co. (NYSE:TIF) also came out with solid sales numbers and provided optimistic view for fiscal 2017. However, despite reporting robust holiday sales the stock gained only 1.3% as the company stated that it will take time to bring the previous negative comparable store sales trend back on track.

The jewelry retailer posted better-than-expected sales results for the November-December holiday period. Net sales came in at $1.05 billion, up 8% from the prior-year period. Moreover, comparable-store sales (comps) increased 5%. In constant currencies, net sales rose 6%, while comps gained 3%.

Management stated that robust holiday sales were driven by improved performances both instore and online. The company witnessed growth in sales of fashion jewelry, fine jewelry, watches as well as new home and accessories collection.

Meanwhile, Tiffany’s competitor Signet Jewelers Limited (NYSE:SIG) witnessed dismal holiday season results. Signet’s total sales for the nine-week period ended Dec 30, 2017, decreased 3.1% to $1,881.7 million from $1,940.9 million in the prior year, while same store sales fell 5.3%. On a constant currency basis, total sales dropped 3.9%.

Net Sales by Regions

Sales in the Americas rose 7% to $516 million, while comps also increased by 6%. Higher spending by local customers and growth across the United States, Canada as well as Latin America drove the region sales.

Sales in the Asia-Pacific region jumped 16% to $232 million, while comps were up 7% primarily driven by fresh store opening and rise in wholesale sales. Rise in retail sales were owing to surge in spending mainly in mainland China, Hong Kong and Korea.

Sales in Japan inched up 1% to $145 million, while comps remained flat.

Sales in Europe came in at $136 million, up 14%, while comps gained 2%.On constant currency, sales rose 5% but comps declined 7%.

Other sales came in at $18 million, down 10% but comps increased 14%. The company stated that increase in comps was overshadowed by fall diamond wholesale sales.

Outlook

Following, robust holiday sales the company raised its fiscal 2017 view. The company now expects sales on a reported and constant-exchange-rate basis to increase by nearly 4%, compared with prior guidance of increase by a low-single-digit percentage.

Management now anticipates fiscal 2017 earnings per share to increase by a double-digit percentage from fiscal 2016 earnings of $3.55, compared with the earlier estimate of rise by high-single-digit percentage. Moreover, it expects earnings to jump by at least a high-single digit percentage over adjusted earnings of $3.75 per share reported in fiscal 2016, up from the prior estimate of rise by mid-single digit percentage.

Nonetheless, management stated that the updated guidance doesn’t include any impact from the latest tax reforms.

The company also provided preliminary view for fiscal 2018. It anticipates sales to increase by mid-single digit percentage. However, expects earnings for fiscal 2018 to be in the range of flat to down marginally from the estimated fiscal 2017 earnings.

Bottom Line

We still believe Tiffany’s omni-channel platform, store expansion programs, tapping of new markets and venturing into new revenue generating avenues is likely to help improve performance. The company's shares have advanced 17.1% in the past three months and have comfortably outperformed the industry, which witnessed an increase of 9.5%. Tiffany currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from Tiffany, other retailers such as Urban Outfitters (NASDAQ:URBN) and Kohl’s Corp. (NYSE:KSS) registered sales growth of 3.6% and 6.9%, respectively, during the November-December period, while both J. C. Penney (NYSE:JCP) and Target (NYSE:TGT) recorded comparable store sales growth of 3.4%.

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