Shares of Tiffany & Company TIF rose roughly 6.7% during pre-market trading session following the company’s better-than-expected first-quarter fiscal 2015 results. The quarterly earnings of 81 cents a share beat the Zacks Consensus Estimate of 69 cents. On the other hand, net sales of $962.4 million also surpassed the Zacks Consensus Estimate of $913.5 million.
However, what came as a drawback for this Zacks Rank #3 (Hold) stock was the year-over-year decline of 16.5% in earnings per share from 97 cents delivered in the year-ago quarter due to fall in sales and higher selling, general and administrative expenses. Net sales declined 5% due to sluggishness witnessed in Japan, partially offset by improved performance in other regions. Moreover, foreign currency headwind also adversely impacted the results.
In constant currencies, net sales inched up 1%, however, comparable-store sales (comps) fell 1%.
By geographic segments, sales in the Americas grew 1% to $444 million, while comps declined by an equivalent rate. Sales in the Asia-Pacific region edged down 1% to $259 million, and comps fell 2%. Japan sales plummeted 30% to $122 million and comps plunged 35%, and sales in Europe came in at $103 million, up 2% but comps declined by a similar rate. Other region sales tumbled 6% to $35 million, while comps decreased 8%.
In constant currencies, sales in the Americas jumped 3% and comps grew 1% during the quarter. Sales in the Asia-Pacific region grew 4%, while comps jumped 2%. Sales in Japan fell 18%, while comps decreased by 24%. Sales in Europe surged 21%, whereas comps increased 17%.
Gross margin expanded 90 basis points to 59.1% due to lower product cost and increase in prices. Operating margin contracted 300 basis points to 17.7%.
Store Update
During the quarter, Tiffany opened 3 company-operated outlets. As of Apr 30, 2015, the company operated 298 stores (123 in the Americas, 75 in Asia-Pacific, 56 in Japan, 38 in Europe, 5 in the U.A.E. and 1 in Russia).
Other Financial Details
Tiffany ended the quarter with cash and cash equivalents and short-term investments of $715.4 million, and total short-term and long-term debt of $1,079.2 million, reflecting 37% of shareholders equity. Capital expenditures of $37 million were incurred during the quarter.
Tiffany bought back 380,000 shares worth $33 million in the quarter. As of Apr 30, 2015, the company had $240 million at its disposal under the share repurchase authorization of $300 million that will expire in Mar 2017.
Guidance
Management continues to anticipate a minimum growth in earnings per share during fiscal 2015 over $4.20 earned in fiscal 2014. This includes a modest decline in the second quarter net earnings compared with the first quarter, while a double-digit percentage growth in net earnings during the remaining quarters.
Favorably Ranked Stocks
Better ranked stocks in the retail sector include Perry Ellis International Inc. PERY, Columbia Sportswear Co. COLM and Oxford Industries Inc. OXM. Perry Ellis sports a Zacks Rank #1 (Strong Buy) while Columbia Sportswear and Oxford Industries carry a Zacks Rank #2 (Buy).
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