Tiffany & Co. (TIF), the global manufacturer and retailer of fine jewelry and other luxury products, has just released its fourth-quarter report to cap off fiscal 2013. The stock moved lower in the trading session that followed, so let's take a thorough look at the results to determine if we should buy on this weakness or if we should avoid investing in Tiffany for now.
Source: Tiffany's Facebook
The quarterly results
Tiffany released its fourth-quarter report before the market opened on March 21 and the results came in slightly below analysts' estimates; here's a breakdown and a year-over-year comparison:
| Metric | Reported | Expected |
| Earnings Per Share | $1.47 | $1.52 |
| Revenue | $1.30 billion | $1.31 billion |
Source: Benzinga
Source: Tiffany's Pinterest
Tiffany's earnings per share increased 5% and revenue increased 5.1% year-over-year, as global comparable-store sales grew 6%. Sales were strong in all regions on a constant-exchange-rate basis, with growth of 7% in the Americas, 11% in the Asian Pacific, 8% in Japan, 10% in Europe, and 47% in the 'Other' region, which includes the high-growth United Arab Emirates.
Gross profit rose 7.5% to $785.61 million and the gross margin expanded 140 basis points to 60.5%, which showed that Tiffany did not need to offer large promotions during the holidays to draw in customers. Overall, Tiffany had a strong quarter, regardless of whether it met analysts' expectations or not, and I believe the weakness in its stock will only be temporary.
Source: Tiffany's Instagram
What will fiscal 2014 hold?
In the report, Tiffany also provided its outlook for fiscal 2014 with a call for the following results:
- Earnings per share in the range of $4.05-$4.15
- Revenue growth in the high-single-digits
- Open 13 new stores and close four existing stores
- Free cash flow of at least $400 million
How was the quarter in comparison with those of competitors?
Michael Kors (CPRI -0.02%) and Coach (TPR -1.01%), two of Tiffany's largest competitors, have also recently reported their quarterly results. Michael Kors released its third-quarter report for fiscal 2014 on Feb. 4 and Coach released its second-quarter report for fiscal 2014 on Jan. 22; let's see how Tiffany stacked up versus these two luxury giants:
| Metric | Tiffany | Michael Kors | Coach |
| Earnings Per Share | $1.47 | $1.11 | $1.06 |
| EPS Growth | 5% | 73.4% | (13.8%) |
| Revenue | $1.30 billion | $1.01 billion | $1.42 billion |
| Revenue Growth | 5.1% | 59% | (5.3%) |
Source: Company Earnings Reports
Source: Michael Kors' Instagram
Michael Kors reported an absolute blowout quarter, driven by a strong 27.8% increase in comparable-store sales. The company saw its gross profit rise 61.6% to $619.5 million and its gross margin expanded 100 basis points to 61.2%.
Coach, on the other hand, reported a dismal quarter and it was held back by a 13.6% decrease in North American comparable-store sales. Its gross profit fell 9.4% to $982.7 million and its gross margin took a big hit, declining 300 basis points to 69.2%. It is clear that the promotional retail environment of the holiday season proved no match for Michael Kors and Tiffany, but Coach had a very difficult time.
In summary, Tiffany and Michael Kors represent good investment opportunities today, but avoid Coach until it can get back to showing year-over-year growth.
The Foolish bottom line
Tiffany's quarterly results and earnings expectations for fiscal 2014 may have missed expectations, but I believe the weakness in its stock presents a buying opportunity. The company appears well-positioned to continue on its path of growth and this would support a rise in its share price. Foolish investors should strongly consider initiating positions on any further weakness and holding on to them for several years.
