QUOTE AND NEWS
SeekingAlpha  Nov 24  Comment 
Benzinga  Nov 21  Comment 
Tiffany & Co. (NYSE: TIF) shares have seen a good ride in the last month, up around 11 percent. The Street is expecting a decent third-quarter performance from the company when it declares results next Tuesday. Senior Market Strategist at...
Market Intelligence Center  Nov 20  Comment 
Wednesday’s trading in Tiffany & Co. (TIF) gives options traders an opportunity for a 15.83% return. By selling the Jan. '15 $105.00 call and buying the Jan. '16 call at the $75.00 level for a net debit of $25.90, traders will book a profit as...
Market Intelligence Center  Oct 20  Comment 
The option-trade picking algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center have selected a covered-call trade on Tiffany & Co. (TIF) that includes 3.77% downside protection. Sell one contract of the Jan. '15 $92.50...
Japan Today  Oct 19  Comment 
Jeweler Tiffany & Co Japan on Monday opened a new store in Japan for the first time in five years. The new store is located in Tokyo's Shinjuku shopping district at Shinjuku 3-3-11. It has three floors. The 1st floor is a "fashion salon" for...
Benzinga  Oct 17  Comment 
Barclays initiated coverage on Tiffany & Co (NYSE: TIF) Friday with an Equal-weight rating. Analyst Joan Payson liked the initiatives underway, but thinks "the stock does not fully reflect softness in international markets, which represented...
Benzinga  Oct 16  Comment 
Macquarie upgraded Tiffany & Co. (NYSE: TIF) in a report issued Wednesday from Neutral to Outperform and maintained the price target of $115. Analysts led by Laurent Vasilescu and Stephanie Wakeham noted that they " leverage insights from our...
TheStreet.com  Oct 16  Comment 
NEW YORK (TheStreet) -- Tiffany & Co shares are up 1.47% to $89.06 on Thursday after analysts at Macquarie upgraded the stock to "outperform" from "neutral" while keeping its $115 price target. The firm sees the declining price of precious...




RELATED WIKI ARTICLES
 

Tiffany & Co. (NYSE: TIF) is a prototype "affordable luxury" retailer. TIF sells high-end jewelry, diamond rings, and lower-priced silver jewelry in retail stores as well as through catalogs and e-commerce.

Tiffany's international presence was a benefit given the state of the American economy--strong Asian sales have helped make up for slacking American and European sales. On the other hand, TIF's international presence can also be a disadvantage, given the fact that without hedging against exchange rate risk, the firm's balance sheet is at the mercy of fluctuations of the U.S. dollar. Also, higher prices of gold and silver lead to higher production costs, which leads to thinner profit margins.

Company Overview

Tiffany & Co. sells its own brand of jewelry as well as third-party designer brands in company-owned and franchised stores in the United States. Tiffany's flagship store in New York City is a vital source of sales for TIF.[1]. Sales at this store, as well as other locations in major American cities, is heavily dependent on foreign tourist spending.

Business Segments

Geographic Segments

Tiffany has five reportable geographic segments. The Americas segment covers the U.S., Canada, Mexico and Brazil. Asia-Pacific consists of Japan, China, Korea, Hong Kong, Taiwan, Australia, Singapore, Macau and Malaysia. This segment operates chiefly through Tiffany boutiques in Asian department stores as well as the company website (for customers in Japan and Australia). The Europe segment covers the United Kingdom, Germany, Italy, France, Austria, Switzerland, Belgium, Spain and Ireland. [3] A geographic net sales breakdown is listed below:

Business Growth

Fiscal 2010 Performance (ended January 31,2011)

Trends and Forces

Expansion into Other Markets

Early 2008 saw the debut of Tiffany's new eyewear line, made possible through a deal with Luxottica Group, S.p.A. (LUX).[4] Tiffany's also partnered with Softbank in 2008 to produce 8 diamond-encrusted cell phones that cost 13 million yen (or $134,000 USD) each and sold out in three days.[5] Starting in 2008, Tiffany also opened two, smaller-format stores that offer a selected product assortment and this is expected to influence the design of new stores that will occupy 3000 - 4000 gross square feet in comparison to full assortment stores that are approximately 5000 gross square feet. Management hopes that this new format will serve a broader set of customers' needs.[6]

Possible Turnaround for Luxury Goods Market

The luxury goods market is rebounding from the slump caused by the global recession. Global luxury goods industry sales are expected to grow 4% in 2010 after a painful 8% decline in 2009, according to Bain & Company's Luxury Goods Worldwide Market Study. US retail sales in the luxury segment increased 15.5% year-over-year in April after a 22.7% surge in March. Consulting firm Unity Marketing reports that much of the growth is coming from super-rich households with incomes over $250,000. This group increased spending by 22.6% in Q1 2010. Tiffany, LVMH, Hermes, and Saks all reported strong profit gains in Q1 2010. [7]

Buoyed by the positive Q1 2010 results Tiffany CFO Jim Fernandez announced plans to launch a leather goods collection including handbags and accessories such as wallets, key holders, business card holders and luggage tags to sell for $100 or $120, less than a typical Tiffany item.[8]

Yen Exchange Rates: Major Risks and Rewards with Fluctuations Against the Dollar

Due to its large international segment exchange rates play a major role in Tiffany's performance. Because of foreign exchange rate fluctuations sales abroad can be worth either more or less when translated back into dollars. In 2009, Tiffany gained 7% on Japanese sales due to favorable exchange rate fluctuations. [9] In Q1 2010, Japan sales rose 50% year over year with a 13% positive exchange rate effect built into that reported rise. [10] Tiffany minimizes the potential negative impact of a strengthening U.S. dollar against the Japanese yen by purchasing put option contracts as hedges of forecasted purchases of merchandise over a maximum term of 12 months.

Exchange rates also directly play a part in domestic sales as they influence foreign tourist spending. When the dollar is weak, U.S. goods are relatively cheap for foreign customers and this leads to higher sales from foreign tourists in U.S. cities such as New York, San Francisco, Las Vegas and other tourist-popular cities. This is particularly important in the New York flagship store where a majority of sales are from foreign tourist purchases.

Rising Commodities Prices Leads to Higher Production Costs



As a jewelry retailer, a large portion of Tiffany's costs relies on the costs of raw materials such as gold, silver and diamond. From April to May 2009, the prices of gold and silver have both increased. The increase in the price of raw materials leads to an increase in production costs, which leads to thinner profit margins. If Tiffany does not raise prices to compensate for the increase in production costs then it makes less money per sale. Raising prices can have an adverse effect on Tiffany's sales given the economic state of the economy in mid-2009. Diamond prices, on the other hand, have returned to 2007 and 2008 levels[11], meaning majority of production cost increase comes from increased gold and silver prices.

Competition

Jewelry shoppers are less price sensitive than consumers of other goods, and cost is often not the major factor in a purchase decision. Important points of differentiation are quality, service and image. Thus, smaller specialized jewelers are able to compete on a store-to-store basis against larger companies such as Tiffany. As such, Tiffany's competition comes from a variety of sources, including other specialty jewelry retail chains, department stores with jewelry operations and small jewelry shops. Tiffany's largest direct competitors include Signet Group (SIG), Zale (ZLC), and Blue Nile (NILE). Signet Group (SIG) Zales Blue Nile (NILE) retailers Tiffany faces competition from upscale and exclusive retailers such as Bvlgari and Cartier.

Speciality Jewelry Retailers:

  • Signet Group (SIG) is the world's largest specialty jewelry retailer in terms of sales. The company is based in the United Kingdom and operates stores in the U.K. and the U.S., including Kay Jewelers and Jared The Galleria of Jewelry chains in the United States. Signet Group exceeds Tiffany's in revenue and size; however the company currently lacks a presence in Asia. Tiffany, on the other hand, is in a good position to take advantage of new wealth developing in Asia due to the fact it already has stores in that region.
  • Zale (ZLC) specializes in diamond jewelry and operates mostly mall-based stores as well as mall kiosks only in North America. It lacks an international presence, however makes up for it through volume in North America. Both Zale and Tiffany sell low-priced jewelry, but Zale only extends to moderately-priced pieces while Tiffany seeks to maintain a "high-low" approach by selling $200 pieces next to $50,000 ones.
  • Blue Nile (NILE) is the largest online-only retailer of certified diamonds and fine jewelry. The company's sales are much smaller than Tiffany's. The fact that the company sells its goods exclusively online makes it available to a wider audience than Tiffany's, whose goods must be purchased through its own stores.

Department Stores:

References

  1. Tiffany & Co. (TIF) 10-K 2010
  2. 2.0 2.1 2.2 2.3 TIF 2010 10-k
  3. Tiffany 2009 Annual Report
  4. Tiffany, Luxxotica Make Eyewear Pact
  5. Just 3 days to sell out Tiffany Diamond Phones
  6. http://www.shareholder.com/visitors/DynamicDoc/document.cfm?DocumentID=2787&CompanyID=TIF&zid=8114872f
  7. Luxury goods market slowly regaining shine
  8. Tiffany reiterates 2010 expansion plans
  9. Tiffany 2009 Annual Report p.34
  10. Tiffany Q1 2010 10-q p.18
  11. Tiffany & Company F1Q09 (Qtr End 4/30/09) Earnings Call Transcript.
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