Wall Street Journal
By Melodie Warner
Tiffany & Co.'s fiscal first-quarter earnings rose 26%, topping the company's own guidance, as it continued to post double-digit sales growth and improved margins.
Shares were trading up 2.3% at $71.65 premarket as the company raised its full-year earnings estimate to $3.45 to $3.55 a share from its March forecast of $3.35 to $3.45. The stock has risen 61% over the past year.
The jewelry retailer has seen increased sales of late, benefiting from recovering demand for high-end goods and its expansion into international markets. Tiffany had warned that store closings caused by the Japan earthquake and tsunami would affect earnings by five cents a share. Those stores have since re-opened and Japan sales rose 7% to $123.4 million.
For the quarter ended April 30, Tiffany reported a profit of $81.1 million, or 63 cents a share, up from $64.4 million, or 50 cents, a year earlier. Excluding items, earnings rose to 67 cents from 48 cents. The most-recent quarter included a headquarters relocation charge of 4 cents, while the year-earlier quarter included a 2-cent tax benefit.
Sales jumped 20% to $761 million. Excluding currency changes, they rose 16%. In March, the company projected per-share earnings of 57 cents on an 11% sales increase.
Gross margin rose to 58.3% from 57.8%. Total same-store sales rose 19%, or 15% on a constant-exchange-rate basis.
Every geographic segment saw double-digit sales growth, including a 19% increase in the Americas—which accounted for the bulk of the total—a 37% climb in the Asia-Pacific region and a 25% rise in Europe.
Showing posts with label Tiffany. Show all posts
Showing posts with label Tiffany. Show all posts
Thursday, May 26, 2011
Friday, April 22, 2011
Lululemon, Other Trendy Retailers Enjoy Pricing Power
By Marilyn Much
As material and labor expenses soar, retailers can face a lose-lose choice: absorb the costs and hurt already-thin margins or hike prices at the expense of sales from strained consumers.
But popular upscale chains with high margins and strong brands can hike price tags without losing sales.
Yoga apparel chain Lululemon Athletica enjoys strong loyalty for its unique products, says Sterne Agee analyst Jennifer Milan.
"They have an almost cultlike brand loyalty," she said. "They provide yoga-inspired active wear that has a unique aesthetic, and customers gravitate to that."
Tiffany, Deckers Outdoor and Coach also wield enough clout with their clientele to raise prices without a big impact.
The surge in cotton futures is finally filtering down to clothing prices. In second-half 2011, retailers' cost of goods per unit will be 15% higher than a year earlier, figures Sterne Agee analyst Kenneth Stumphauzer.
Chains should be able to offset some of those costs via measures such as moving sourcing outside of China, where labor costs have shot up. But beyond such "levers," retailers will need to raise prices to protect margins from painful declines, he says.
Retailers are expected to raise prices on goods that hit the shelves in the summer and fall.
Average apparel prices will rise 10% to 12% in the second half vs. last year, predicts Stumphauzer.
How much of their higher costs retailers pass on will depend on what they think the customer is willing to absorb, says John Long, a retail strategist at consulting firm Kurt Salmon.
Unique goods are key, says Joel Bines, managing director with AlixPartners, a consulting firm.
"Exclusivity is the only thing that creates pricing power in retailing," Bines said. Tiffany sells largely exclusive products to customers that tend not to be price conscious, he adds.
Soaring material costs prompted the jeweler to raise prices in February 2010 and January 2011.
On silver jewelry and other items where inventory turns rapidly, cost hikes flow through Tiffany's gross margins faster, requiring a "sooner price increase" than on slower-turning items, says spokesman Mark Aaron.
"All we want to do is maintain the gross margin on a specific product, and we believe our customers understand that," Aaron said.
Pricing Power, With Limits
Tiffany knows it doesn't have "unlimited pricing power," he added.
Lululemon also lacks pricing omnipotence. Costs should pressure gross margins later this year, analysts say. But its strong profitability means it can afford to take a modest hit.
Meantime, analyst Christopher Svezia of Susquehanna Financial said, "Deckers has made select pricing increases on key products over the past several years in response to supply constraints of sheepskin and due to product mix, and it hasn't affected sales."
He added, "Ugg is very controlled in its distribution, their products are in demand and they continue to evolve the assortment. As a result, their pricing power is that much stronger to take it up if necessary."
Svezia expects Deckers to hike prices again this year to offset higher sourcing costs. Stumphauzer figures the fashion footwear firm could raise Ugg boots prices by $30 and its loyal customers wouldn't hesitate to pay.
Coach, which reports fiscal Q3 results Tuesday, is a luxury handbag and accessories retailer and designer that caters to high-end shoppers. CEO Lew Frankfort told IBD in an interview in January that it will pass on some of its higher input costs.
Tuesday, April 12, 2011
Luxury Retailers Stand To Continue Producing Strong Numbers
Wall Street Journal
By Karen Talley
Upper-end retailers, like Saks Inc. and Neiman Marcus Group Inc., saw their fortunes dinged by the recession, but they were the first to bounce back and their lead is likely to continue.
Luxury customers, while thrown by the economic downturn, held onto their jobs to a greater degree than lower-income consumers, government data show. As a result, the effect on the upper end was more psychological as they hunkered down, but were hardly destitute.
"During the recession, people, shoppers at the high end still had money, but there was embarrassment," said Barbara Kahn, director of the Jay Baker Retailing Center at the University of Pennsylvania's Wharton School. "Now, we're in a recovery where there is less of a patina."
There is also greater wealth as the stock market has mounted a significant recovery.
"The strength of our business--luxury--is typically tied to how our customers feel about their personal financial situations," said Julia Bentley, spokeswoman for Saks. "The financial markets are a good barometer of this."
But customers are not in a freewheeling mood. "They remain very discriminating in their purchases," Bentley said. "They are responding to special, differentiated products" and a more personalized shopping experience.
Some luxury retailers also say they have not really seen a return of the "aspirational" customer--someone that wants to be associated with the upper-end but pulled in their horns during the recession. Mark Aaron, spokesman for Tiffany & Co. (TIF), cited softness in "entry-level price point silver jewelry." For some consumers, "The environment may be too difficult for them to make that modest investment," Aaron said.
The still-restrained approach to spending and an aspirational customer that remains relatively scarce could produce a bump when they do open their wallets and add to the spending the luxury retailers are already seeing. As a result, higher-end retailers like Tiffany, Saks, Nordstrom Inc., Coach Inc. and Neiman Marcus, some of which had very dark days a couple of years ago, stand to continue delivering solid sales.
For March, the latest available period, same-store sales gains were 11.1% for Saks; 5.1% for Nordstrom; and 7% for Neiman Marcus, which includes its Bergdorf Goodman stores. For more mainstream retailers, Kohl's Corp. showed a 6.5% decline in comparable-store sales; J.C. Penney Co. a 0.3% drop; and Target Corp. a 5.5% fall, all off of declines the prior year.
"In the middle market, employment is getting better, but more slowly," Kahn said.
Middle-class consumers are also facing higher prices because of the greatly increased cost of cotton and higher labor and transportation costs. Those factors could continue making that group reluctant to spend.
A number of higher-end retailers, while facing the same forces, say they don't expect to be hit as hard because their merchandise has more embellishments, which can equate to less use of cotton. They also aren't mass merchants, buying, for instance, cotton tee-shirts in bulk, and having to charge their customers higher prices.
There are, however, some potential stumbling blocks for luxury retailers that most mainstream stores are likely to duck. The earthquakes and tsunami in Japan are crimping tourism to and from that country, cutting out a solid revenue source for many upper end retailers.
There is also discussion of raising taxes for the wealthy to help fund raising the debt ceiling--the limit on how much the U.S. government can borrow. The move could crimp upper-end and aspirational buying.
"When the government intervenes and decides to raise, taxes it will impact discretionary spending," said Michael Londrigan, head of fashion merchandising at LIM College, which teaches business courses in retailing.
But the setbacks may not be too severe. "Right now, you're seeing luxury shoppers carrying two, three bags instead of one, and I see that happening for some time," Londrigan said.
By Karen Talley
Upper-end retailers, like Saks Inc. and Neiman Marcus Group Inc., saw their fortunes dinged by the recession, but they were the first to bounce back and their lead is likely to continue.
Luxury customers, while thrown by the economic downturn, held onto their jobs to a greater degree than lower-income consumers, government data show. As a result, the effect on the upper end was more psychological as they hunkered down, but were hardly destitute.
"During the recession, people, shoppers at the high end still had money, but there was embarrassment," said Barbara Kahn, director of the Jay Baker Retailing Center at the University of Pennsylvania's Wharton School. "Now, we're in a recovery where there is less of a patina."
There is also greater wealth as the stock market has mounted a significant recovery.
"The strength of our business--luxury--is typically tied to how our customers feel about their personal financial situations," said Julia Bentley, spokeswoman for Saks. "The financial markets are a good barometer of this."
But customers are not in a freewheeling mood. "They remain very discriminating in their purchases," Bentley said. "They are responding to special, differentiated products" and a more personalized shopping experience.
Some luxury retailers also say they have not really seen a return of the "aspirational" customer--someone that wants to be associated with the upper-end but pulled in their horns during the recession. Mark Aaron, spokesman for Tiffany & Co. (TIF), cited softness in "entry-level price point silver jewelry." For some consumers, "The environment may be too difficult for them to make that modest investment," Aaron said.
The still-restrained approach to spending and an aspirational customer that remains relatively scarce could produce a bump when they do open their wallets and add to the spending the luxury retailers are already seeing. As a result, higher-end retailers like Tiffany, Saks, Nordstrom Inc., Coach Inc. and Neiman Marcus, some of which had very dark days a couple of years ago, stand to continue delivering solid sales.
For March, the latest available period, same-store sales gains were 11.1% for Saks; 5.1% for Nordstrom; and 7% for Neiman Marcus, which includes its Bergdorf Goodman stores. For more mainstream retailers, Kohl's Corp. showed a 6.5% decline in comparable-store sales; J.C. Penney Co. a 0.3% drop; and Target Corp. a 5.5% fall, all off of declines the prior year.
"In the middle market, employment is getting better, but more slowly," Kahn said.
Middle-class consumers are also facing higher prices because of the greatly increased cost of cotton and higher labor and transportation costs. Those factors could continue making that group reluctant to spend.
A number of higher-end retailers, while facing the same forces, say they don't expect to be hit as hard because their merchandise has more embellishments, which can equate to less use of cotton. They also aren't mass merchants, buying, for instance, cotton tee-shirts in bulk, and having to charge their customers higher prices.
There are, however, some potential stumbling blocks for luxury retailers that most mainstream stores are likely to duck. The earthquakes and tsunami in Japan are crimping tourism to and from that country, cutting out a solid revenue source for many upper end retailers.
There is also discussion of raising taxes for the wealthy to help fund raising the debt ceiling--the limit on how much the U.S. government can borrow. The move could crimp upper-end and aspirational buying.
"When the government intervenes and decides to raise, taxes it will impact discretionary spending," said Michael Londrigan, head of fashion merchandising at LIM College, which teaches business courses in retailing.
But the setbacks may not be too severe. "Right now, you're seeing luxury shoppers carrying two, three bags instead of one, and I see that happening for some time," Londrigan said.
Tiffany's Michael Kowalski Sees Pay Hike in 2010
From WWD Issue 04/11/2011
Tiffany & Co. chairman and chief executive officer Michael Kowalski’s pay package rose nearly 17 percent last year as a hefty increase in his stock awards more than compensated for a reduction in his cash bonus.
Kowalski earned a total of $9.2 million last year, up 16.9 percent from $7.9 million in 2009.
He had a salary of $959,000, down 3.9 percent from the prior year’s $997,000, and his cash bonus — technically nonequity incentive plan compensation — was down 22.5 percent, to $1.6 million from $2 million, as Tiffany surpassed its target earnings number of $315 million but fell short of the $410 million that would have allowed the ceo to qualify for the maximum amount of $2 million.
The firm’s 2010 net income rose 39.1 percent to $368.4 million from $264.8 million in 2009, while net sales rose 13.9 percent to $3.06 billion. Same-store sales rose 8 percent while gross margin declined to 39.8 percent of sales from 40.2 percent.
Kowalski’s stock awards, tied to earnings per share and return on assets, rose 82.9 percent to $2.9 million from $1.6 million while his option awards felt 1.8 percent to $1.5 million. Because of fluctuating stock prices and vesting schedules, these awards aren’t necessarily realized by the named officers, but companies are required to include them in compensation tables when submitting proxies to the Securities and Exchange Commission, as Tiffany did on Friday.
The totals also include $2.1 million to reflect changes in pension value and nonqualified deferred compensation, 32.8 percent above the 2009 level, and other compensation of $167,000, down 0.7 percent.
Monday, March 21, 2011
Tiffany's Profit Rises 29% as Sales Climb, Warns on Japan
Wall Street Journal
By Karen Talley
Tiffany & Co.'s fourth-quarter profit climbed 29% as the jeweler's international expansion continued but the company warned that the catastrophe in Japan will weigh on future results.
Sales were evenly split between the U.S. and overseas for the first time. The geographic diversity paid off, as results topped expectations.
The showing "demonstrates the power of a global expansion that has provided ... robust and sustainable growth," said Chief Executive Michael Kowalski.
Every geographic segment saw double-digit sales growth, including a 10% increase in the Americas—which accounted for the bulk of the total—and a 25% climb in the Asia Pacific region. Internet and catalog sales in the Americas were up 8%. In terms of international expansion, it has now set its sights on India.
The company, famous for its diamonds and its robins-egg blue boxes, has benefited from generally recovering demand for high-end goods.
Shares were up 5%, or $2.99, in early afternoon Monday to $60.25 on the New York Stock Exchange, rebounding from a sell-off last week on concerns about the outlook for sales in Japan.
Tiffany is one of the first U.S. retailers to publicly discuss the financial effects of the catastrophe in Japan, which accounts for 18% of the company's sales. The jeweler said it experienced a number of closings and the result of these events and other general disruptions in Japan would affect earnings by five cents a share in current quarter. It expects sales in Japan to fall 15% in the current quarter.
"We cannot forecast for Japan for subsequent quarters, so our expectation for the second, third, and fourth continue to call for sales roughly equal to the prior year in Japan," Chief Financial Officer James Fernandez said.
Mr. Fernandez's decision to avoid projecting further opens the door to earnings revisions for Tiffany, analysts said.
Japan has been a trouble spot for Tiffany, but the company was starting to see sales pick up until the earthquake hit. Now, at least for a time, the Japanese may not be eager to spend on the types of products Tiffany sells and tourism may be way down.
Tiffany's sales in Japan rose 7% for the year, but all of the increase was attributable to the currency-translation effect from a more-robust yen, which was 8% stronger than the prior year. On a constant-exchange-rate basis, total Japan sales for the year declined 1% and comparable-store sales fell 4%.
Tiffany, a company that is coming up on its 175th year, continues to see a dichotomy in the U.S., with certain merchandise that sells for less than $500 showing softness while higher-end items are moving.
For the new year, the company forecast earnings of $3.35 to $3.45 a share, with world-wide sales climbing 12% to 14%. That would be above the consensus forecast of analysts polled by Thomson Reuters, who were projecting a per-share profit of $3.25 on sales of $3.37 billion, which represents a 9.1% increase.
Tiffany forecast current-quarter earnings per share of 57 cents. It sees world-wide sales growth of 11% in the first quarter, despite the 15% decline in Japan. Analysts most recently expected earnings of 55 cents on a 14% sales increase.
For the period ended Jan. 31, Tiffany posted a profit of $181.2 million, or $1.41 a share, up from $140.4 million, or $1.10 a share, a year earlier. The latest result included three cents a share in costs related to the pending relocation of New York headquarters staff. Analysts most recently expected a profit of $1.39.
Total sales jumped 12% to $1.1 billion. Excluding currency changes, they rose 11%. Counting only stores open at least one year, sales were up 9%. Gross margin widened to 60.9% from 58.7%.
By Karen Talley
Tiffany & Co.'s fourth-quarter profit climbed 29% as the jeweler's international expansion continued but the company warned that the catastrophe in Japan will weigh on future results.
Sales were evenly split between the U.S. and overseas for the first time. The geographic diversity paid off, as results topped expectations.
The showing "demonstrates the power of a global expansion that has provided ... robust and sustainable growth," said Chief Executive Michael Kowalski.
Every geographic segment saw double-digit sales growth, including a 10% increase in the Americas—which accounted for the bulk of the total—and a 25% climb in the Asia Pacific region. Internet and catalog sales in the Americas were up 8%. In terms of international expansion, it has now set its sights on India.
The company, famous for its diamonds and its robins-egg blue boxes, has benefited from generally recovering demand for high-end goods.
Shares were up 5%, or $2.99, in early afternoon Monday to $60.25 on the New York Stock Exchange, rebounding from a sell-off last week on concerns about the outlook for sales in Japan.
Tiffany is one of the first U.S. retailers to publicly discuss the financial effects of the catastrophe in Japan, which accounts for 18% of the company's sales. The jeweler said it experienced a number of closings and the result of these events and other general disruptions in Japan would affect earnings by five cents a share in current quarter. It expects sales in Japan to fall 15% in the current quarter.
"We cannot forecast for Japan for subsequent quarters, so our expectation for the second, third, and fourth continue to call for sales roughly equal to the prior year in Japan," Chief Financial Officer James Fernandez said.
Mr. Fernandez's decision to avoid projecting further opens the door to earnings revisions for Tiffany, analysts said.
Japan has been a trouble spot for Tiffany, but the company was starting to see sales pick up until the earthquake hit. Now, at least for a time, the Japanese may not be eager to spend on the types of products Tiffany sells and tourism may be way down.
Tiffany's sales in Japan rose 7% for the year, but all of the increase was attributable to the currency-translation effect from a more-robust yen, which was 8% stronger than the prior year. On a constant-exchange-rate basis, total Japan sales for the year declined 1% and comparable-store sales fell 4%.
Tiffany, a company that is coming up on its 175th year, continues to see a dichotomy in the U.S., with certain merchandise that sells for less than $500 showing softness while higher-end items are moving.
For the new year, the company forecast earnings of $3.35 to $3.45 a share, with world-wide sales climbing 12% to 14%. That would be above the consensus forecast of analysts polled by Thomson Reuters, who were projecting a per-share profit of $3.25 on sales of $3.37 billion, which represents a 9.1% increase.
Tiffany forecast current-quarter earnings per share of 57 cents. It sees world-wide sales growth of 11% in the first quarter, despite the 15% decline in Japan. Analysts most recently expected earnings of 55 cents on a 14% sales increase.
For the period ended Jan. 31, Tiffany posted a profit of $181.2 million, or $1.41 a share, up from $140.4 million, or $1.10 a share, a year earlier. The latest result included three cents a share in costs related to the pending relocation of New York headquarters staff. Analysts most recently expected a profit of $1.39.
Total sales jumped 12% to $1.1 billion. Excluding currency changes, they rose 11%. Counting only stores open at least one year, sales were up 9%. Gross margin widened to 60.9% from 58.7%.
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