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Consumers are becoming more and more socially conscious, and want the goods and services they use to measure up. It doesn't take much. A simple action that costs a company very little, or nothing at all, can make a real difference in the mind of the consumer, and the company's bottom line.
I've been hearing good things on the corporate social responsibility, or CSR, front about Tiffany (NYSE: UL ) lately. Let's have a look at the high-end jewelry retailer, and analyze the company in terms of it's performance as a socially-conscious enterprise, as a business, and as an investment.
CSR cred? Check!
According to Michael J. Kowalski, Tiffany's chairman and CEO, in the CSR section of the Tiffany website:
Tiffany & Co. is committed to obtaining precious metals and gemstones and crafting our jewelry in ways that are socially and environmentally responsible. It is simply the right thing to do; and our customers expect and deserve nothing less.
Responsible sourcing is, to me, the most important of Tiffany's various CSR initiatives. We've all heard about the killing that can surround the mining of precious metals and gemstones in various parts of the world. Tiffany works with the mining industry, nongovernmental organizations, and local communities to develop responsible operating standards, and safeguard human workers' rights throughout its supply chain. The company is also committed to minimizing its environmental footprint, and protecting the natural world upon which its business depends.
Notably, Tiffany also operates a charitable foundation, called the Tiffany & Co. Foundation. Founded in 2000, it's the company's philanthropic arm, and provides grants to nonprofit organizations working in the environment and the arts. Since its inception, the company has contributed approximately $60 million to the Foundation's endowment.
A great company at a great price
CSR cred firmly established. Now, let's look at a few basic metrics, and see how Tiffany measures up against its peers as a business and as an investment:
Revenue growth: In its most recent quarter, Tiffany grew its revenue by a solid 7.8% year over year. Luxury-goods peer Coach (NYSE: COH ) grew its revenue by an even better 10.6% YOY. High-end yoga gear retailer Lululemon (Nasdaq: LULU ) did extraordinarily well on this metric, with YOY revenue growth of 33.1%. Well done to all our companies here.
Earnings growth: YOY earnings for Tiffany were down a bit, actually having contracted by 1.6%. Coach was a bit better than flat on this metric, with YOY earnings growth of 3%. Lululemon is, again, off the charts here, with YOY earnings growth of 49.1%.
Cash-to-debt ratio: It's always good to see more cash than debt on the balance sheet -- ideally, at least 1.5 times more.
- With $442 million in cash, and $712 million in debt, Tiffany's C/D is a mere 0.62.
- With $761 million in cash, and $23 million in debt, Coach's C/D is a very impressive 33.
- Finally, $444 million in cash, and zero debt, give Lululemon about the best cash-to-debt position you could hope for, minus even more cash piled into the coffers.
With money as cheap as it is, too many companies are highly leveraged these days, and it's an ultimately dangerous position to be in. When things go wrong, and they always do, the bigger the war chest a company has, the better chance it has of coming through the other side intact. As such, Tiffany could be doing better on this metric.
Price-to-earnings ratio: Tiffany and Coach both have P/Es in the upper teens, i.e., they're both reasonably priced. Lululemon, however, commensurate with its sky-high performance on our other metrics, also has a sky-high P/E of 47. When you buy Lululemon at a P/E like this, you're counting on some serious future growth. Buckle up, folks.
Making money while making a difference
Tiffany is no Lululemon, I'll grant you that, but not too many companies are right now, operating in a fairly depressed worldwide economy. Lululemon is also in its shiny-new-company big-growth faze; but that's what makes the Tiffany story so much the better. The company was founded in 1837, and is not only still around, but performing solidly. Notably, Tiffany just announced it will open a flagship Paris store. The takeaway is, Tiffany's numbers are strong enough overall to demonstrate that, even though it takes its CSR duties very seriously, it can also be a strong, traditional corporate competitor.
Tiffany isn't perfect in this regard but, to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good. Always on the lookout for a great, socially responsible investment? It's hard to beat Whole Foods Market, the organic grocery store that's booked investors more than 30-times their initial investment since its IPO.
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