Shares of Tiffany & Company TIF touched a 52-week low of $81.50 last Thursday – the day this jewelry retailer came out with its second-quarter fiscal 2015 results – before closing at $83.29, down 2.1% from the previous day. However, the stock did recover by 40 basis points the very next day and settled at $83.61, as the market closed for the week. Nonetheless, a look at the stock’s year-to-date performance shows that it has nosedived 20%.
What Went Wrong in Q2?
Tiffany succumbed to a negative earnings surprise of 4.4% in the second quarter of fiscal 2015, after registering back-to-back earnings beat of 17.4% in the first quarter and 0.7% in the final quarter of fiscal 2014. The company’s quarterly earnings of 86 cents a share missed the Zacks Consensus Estimate of 90 cents and fell 10.4% from 96 cents delivered in the year-ago quarter. A strong U.S. dollar and increased selling, general and administrative expenses hurt the company’s bottom line.
Tiffany’s revenues for the second quarter also fell short of the Zacks Consensus Estimate, after outperforming the same in the first quarter. Net sales of $990.5 million came in marginally lower than $992.9 million recorded in the prior-year quarter, and way below the Zacks Consensus Estimate of $1,006 million. Net sales bore the brunt of foreign currency headwinds that lowered the value of sales generated in the overseas market and also resulted in reduced spending by tourists.
The dismal performance, global turbulence and the strong dollar compelled management to take a cautious stance. It now projects fiscal 2015 earnings to decline 2–5% from last year’s $4.20 per share. Earlier, it had anticipated minimum growth in earnings per share in fiscal 2015 over fiscal 2014.
Which Way are Estimates Treading?
Following Tiffany’s discouraging performance and dull outlook, the Zacks Consensus Estimate witnessed a downtrend as analysts lowered their estimates to better align with management’s guidance.
Analysts polled by Zacks are now less constructive on the stock’s future performance. Over the past 7 days, the Zacks Consensus Estimate of $4.04 and $4.63 per share for fiscal 2015 and fiscal 2016 has declined 4% and 2.1%, respectively. Moreover, the Zacks Consensus Estimate for the third quarter has declined 8.4% to 76 cents over the same time frame.
What’s the Silver Lining in the Stock?
We believe that the company’s omni-channel platform, store expansion programs and enhancement of market share may act as catalysts, and help improve its top- and bottom-line performances in the long run.
Zacks Rank
Tiffany currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector include American Eagle Outfitters Inc. AEO, Signet Jewelers Limited SIG and Citi Trends Inc. CTRN, all carrying a Zacks Rank #2 (Buy).
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