Tiffany & Co. TIF, one of the leading makers of fine jewelry, has been facing slumping revenues for some time now.
In the first quarter of fiscal 2015, the company’s sales fell 5% year over year. Sales in Japan plummeted 30% to $122 million and comps plunged 35%. In the Asia-Pacific region, sales edged down 1% to $259 million and comps fell 2%. In other regions, sales tumbled 6% to $35 million while comps decreased 8%. Going ahead, intensifying foreign exchange fluctuations pose significant challenges for its international business.
While sales in the Americas grew 1% to $444 million, comps declined by an equivalent rate. This is particularly distressing as the company generates more than half of its revenues from this region.
As a result, earnings per share of 81 cents in the first quarter were 16.5% lower than 97 cents recorded in the prior-year quarter.
To battle the odds, the company is focusing on expanding its omni-channel capabilities as well its presence in newer markets. Moreover, Tiffany is well positioned to improve both its top and bottom lines in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. The company also intends to expand its distribution network by adding stores in both new and existing markets.
The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn boosts store productivity. Tiffany mainly puts emphasis on improving sales per square foot by increasing customer traffic and converting them into potential buyers by targeted advertising, sales training and customer-oriented initiatives.
At present, Tiffany carries a Zacks Rank #3 (Hold). Better-ranked stock in the same sector is Movado Group, Inc. MOV which carries a Zacks Rank #2 (Buy). Other stocks in the broader retail sector worth considering include American Eagle Outfitters, Inc. AEO and Boot Barn Holdings, Inc. BOOT, both sporting a Zacks Rank#1 (Strong Buy).
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