Tiffany to Expand in New York (SIG) (TIF) (ZLC)

Zacks

In an effort to bank upon the incremental sales in New York, Tiffany & Company (TIF) announced the opening of its new store in New York’s SoHo district.

The new 7,000-square-foot store in SoHo district is slated to open in September 2012, marking the company’s third store in New York. Further, the opening also coincides with Tiffany’s 175th anniversary.

Going further, Tiffany plans to open 17 stores in fiscal 2011 with 6 in the Americas, 3 in Europe and 8 in Asia-Pacific.

As of July 31, 2011, the company operated 236 stores (98 in the Americas, 55 in Japan, 52 in Asia-Pacific and 31 in Europe).

Tiffany is well positioned to support robust sales and earnings growth by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. Moreover, with nearly half of total sales generated internationally, we believe that the company is well diversified from a regional perspective as well.

Tiffany boasts a significant position in the world jewelry market due to its distinctive brand appeal. The company intends to expand its distribution network by adding stores in both the new and existing markets.

The company is focused on opening smaller stores that will offer select collections of lower priced higher-margin products. Tiffany concentrates on improving sales per square foot by increasing customer traffic and converting them into buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.

However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their discretionary spending, and in turn, the company’s growth and profitability.

Given the pros and cons, we prefer to have a long-term Neutral rating on the stock. However, Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.

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