Tiffany's (TIF) Efforts Place The Stock Favorably For 2018

Tiffany & Co. (NYSE:TIF) is well positioned to augment both its top and bottom-line performance in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. The company is steadily introducing new jewelry designs, new watch collection and fragrance, as well as additional jewelry SKUs. It also introduced “build-your-own program” on its website under which customers are allowed to personalize their own charm bracelets.

The company is also 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. Management anticipates gross retail square footage growth of 2% in fiscal 2017.

These initiatives seem inevitable given the company’s dwindling comparable-store sales performance. In the first, second and third quarters of fiscal 2017, comps have declined 3%, 2% and 1%, respectively. However, we noted that the rate of decline has decelerated sequentially.

Further, management had earlier guided SG&A expenses for the fiscal year to increase at a marginally higher rate than sales on account of sustained investment in new signature women's fragrance, launch of new luxury accessories offerings and additional jewelry SKUs. This may strain margins to an extent. We noted that in the first, second and third quarters of fiscal 2017, SG&A expenses had increased 0.2%, 3.7% and 3.3%, respectively.

Nevertheless, Tiffany is leaving no stone unturned to attract consumers and attain incremental revenues. The company envisions net sales for fiscal 2017 to increase by a low-single-digit percentage on a reported and constant-exchange-rate basis. We believe that these strategies are likely to bolster performance and drive the stock further. In the past three months shares of this Zacks Rank #3 (Hold) have increased 13.2%, outperforming the industry’s growth of 5.8%.

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