Tiffany Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Tiffany (TIF) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

As a stalwart in the luxury jewelry space, Tiffany has held up very nicely during the recession as upper-income consumers didn't suffer as much as their less well-off counterparts. But with slowdowns in growth around the world, is the company finally vulnerable? Let's take an early look at what's been happening with Tiffany over the past quarter and what we're likely to see in its quarterly report on Friday.

Stats on Tiffany

Source: Yahoo! Finance.

Will Tiffany shine brighter this quarter?
Over the past few months, analysts have gotten a lot more worried about Tiffany. Earnings-per-share estimates have fallen by $0.06 for the just-ended quarter, and the full-year fiscal 2014 earnings consensus is down $0.32 per share. Yet the stock shows no signs of concern, having risen 15% since mid-December.

Tiffany has already warned that its holiday quarter wouldn't be as good as investors had hoped. Back in January, the jewelry retailer announced that global sales were up just 4%, with U.S. revenue rising even slower at 3%. Projecting that earnings would come in on the low end of its previously projected range, Tiffany said that high input costs and even some rare discounting activity were responsible for squeezing margins to their lowest level in five years.

Tiffany's poor results are a symptom of what seems to be a widespread phenomenon in luxury retail. Coach (TPR 0.30%) came in with earnings that were light during the holiday quarter, with a 2% drop in same-store sales in North America holding the company back despite stronger international revenue. Meanwhile, online jewelry specialist Blue Nile (NILE) also disappointed investors despite seeing 31% sales gains for its engagement-ring segment, as its lofty valuation incorporated even higher expectations.

Interestingly, Tiffany filed suit against Costco last month, seeking damages from the warehouse retailer for allegedly selling counterfeit Tiffany diamond rings. Yet as Fool analyst Alyce Lomax argued just after the suit was filed, legal action may indicate weakness on Tiffany's part.

In its quarterly report, watch for Tiffany to report on the latest conditions in Europe and Asia. If those international markets start to falter more seriously, it could spell another downturn for the jewelry-seller.

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