Jewelry retailer Tiffany & Co. reported third-quarter results this morning. Net income grew by 65%, same-store sales were strong, and margins improved at all levels. The company is looking forward to a strong holiday season, unlike some of its competition. Differentiated by a solid brand and international exposure, Tiffany continues to perform despite an iffy consumer spending environment.
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Like a "Return to Tiffany" sterling silver key ring wrapped up in a "Tiffany Blue" box, investors received a little shiny trinket from jewelry and fine goods retailer Tiffany & Company (NYSE: TIF) this morning. The company reported strong third-quarter results, even as other retailers have been struggling in light of a drop-off in consumer spending. Q3 results Net income grew by a whopping 65% to $36.3 million, compared to $22 million in the year-ago period. Tiffany earned $0.24 a share, ahead of the consensus estimate by three cents. In last year's third quarter, it earned $0.15 a share. Tiffany became more efficient, with margins improving across the board. The company's operating margin rose most dramatically to 17%, from last year's 12.2%. Net margins also increased impressively, to 9.8% from 6.8% a year ago. The company said it's looking forward to a very successful holiday season. That separates Tiffany from many retailers, which are being extra cautious about the upcoming shopping season. One of Tiffany's competitors, jewelry store operator Zale Corp. (NYSE: ZLC), warned the Street at the beginning of November about its holiday prospects. The company lowered its same-store sales growth targets for the holiday season, though did not adjust earnings estimates, because of the current retail environment. Tiffany's differences Secondly, Tiffany benefits from a strong international presence, which helps the company capitalize on the strength of its name. In 1972, it opened its first store in Japan, its biggest international market. Around 40% of Tiffany's total sales in its last fiscal year came from international retail sales. Zales stores are limited to the U.S., Canada, and Puerto Rico. Tiffany's third quarter was strong because the company continues to do what it has always done -- provide beautiful things, and a distinct shopping experience, for its customers. This is also what separates it from its competition, despite the ups and downs of the consumer spending environment. Your Turn:
Tiffany's sales for the quarter, which ended October 31, increased 15% to $369.7 million, from last year's $322.7 million. Tiffany's sales were driven by the 18% same-store sales increase in the company's U.S. stores, coupled with a 10% increase in same-store sales for Tiffany's stores in Japan, its largest international market.
What makes Tiffany different from Zales? First, Tiffany's brand is one of its greatest assets. The company's been around since 1837, and its brand has become synonymous over the years with luxury, beauty, and fine jewelry. Tiffany's brand is as distinct as Tiffany's eggshell shade of blue. There is something magical about Tiffany's, no doubt in large part related to Audrey Hepburn's divine portrayal of Holly Golightly in the 1961 movie Breakfast at Tiffany's. It's not likely we'll ever see a Breakfast at Zales.
Any thoughts on what it is that makes Tiffany so special? Have you ever received a gift from Tiffany's? Did you freak like I did? Talk about it with other Fools on the Tiffany discussion board.
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