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RAPAPORT... Tiffany & Co. reported that sales increased 4 percent year on year to $1.03 billion during the Christmas season, which included the months of November and December. Comparable-store sales rose 6 percent. Revenue from stores in the Americas increased 6 percent year on year to $550 million, while comparable-store sales rose 7 percent. Sales from the Asia-Pacific region increased 5 percent to $196 million and same-store sales were flat.  Tiffany’s business in Japan experienced a 12 percent decline in sales to $135 million due to the negative translation effect from a weaker yen; however, same-store sales increased 10 percent. Sales in Europe improved 11 percent to $131 million and comparable-store sales rose 3 percent. Michael J. Kowalski, Tiffany & Co.'s CEO, said, “Tiffany enjoyed a good holiday season with overall sales results in line with our expectations, and we were pleased to see growth across our fine and statement, engagement and fashion jewelry categories. Based on these sales results and related margins, we expect that full-year earnings before certain charges will meet the most recent forecast we provided in November.” Tiffany & Co. closes its fiscal year on January 31 and anticipates earnings in the rage of $1.27 to $1.37, compared with $3.25 one year ago, due to a $300 million, or $2.33 per diluted share, charge related to an adverse arbitration ruling involving the Swatch Group. The earnings estimate also includes a 5 cent per share expense tied to specific cost-reduction initiatives.
Sterne Agee analyst Ike Boruchow wrote that there is upside to 2014 numbers due to better U.S. comparable-store sales, given that the strongest same-store sales increase in two years was observed during this holiday period. An improved assortment in the fashion jewelry business, notably the Atlas collection, is helping drive upside, according to Boruchow, adding that Tiffany is poised for solid top-line growth in the U.S. this year. ''We also believe that newly appointed senior vice president of North America, Anthony Ledru, continues to make an impact, with his primary focus on the highest volume locations in the U.S., with increasing emphasis on sales training and customer engagement,'' Boruchow wrote. ''We project commodity costs to be down double digits in 2014, and given how long it takes changes in raw material costs to flow through earnings (about one year), there is a tremendous amount of visibility around this opportunity. Looking further out, at current spot prices, raw material costs should continue to be a benefit in 2015, albeit to a lesser magnitude (we estimate LSD-MSD). Other potential gross margin drivers include price increases and product mix (potential recovery of silver business),'' he wrote. Sterne Agee raised its outlook on Tiffany's fourth-quarter earnings per share estimate to the high end of guidance at $1.49 to $3.75 (from $1.48 to $3.74). Tiffany's share price target is $105 and Sterne Agee maintains its rating ''Buy.''
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