Haute jeweler Tiffany (NYSE:TIF) reports Q1 2006 earnings results tomorrow morning. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.
What analysts say:
- Buy, sell, or waffle? Sixteen analysts follow Tiffany, giving the stock five buy ratings, 10 holds, and a sell.
- Revenues. $546.8 million in sales are expected tomorrow, for a 7% rise versus last year.
- Earnings. Profits are expected to climb 4% to $0.28 per share.
What management says:
If analysts' predictions that Q1 profits growth will lag sales growth has you concerned, take comfort in the words of CEO Michael Kowalski, who back in March promised 10% sales growth and 12% profits growth this year, but cautioned that "most of the growth [is] expected in the second half of the year." In the fiscal 2005 earnings release, Kowalski further clarified that about half of the sales growth would come in the form of better same-store sales. The rest, presumably, will come from the (net) 11 new stores planned to be opened this year.
What management does:
The three lines below show two different pictures of Tiffany. From a rolling gross and operating margin perspective, things are pretty steady, with gross margins down a bit and operating margins up a bit, over the last 18 months. Net margins look a bit different. Between the October 2004 quarter and the January 2006 quarter, Tiffany had four quarters of supercharged net profit margins. As discussed in last quarter's Foolish Forecast, though, this was due to the company enjoying a large, one-time gain in Q4 2004, which inflated the net profitability shown in the rolling results in that and the succeeding three quarters.
|
Margins % |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
1/06 |
|---|---|---|---|---|---|---|
|
Gross |
56.6 |
55.8 |
55.2 |
55.2 |
55.4 |
56 |
|
Op. |
15.6 |
14 |
13.9 |
14.3 |
14.3 |
16 |
|
Net |
9.3 |
13.8 |
13.6 |
14.1 |
14.1 |
10.6 |
One Fool says:
One of the most striking strengths at Tiffany in recent quarters has been the company's ability to manage its working capital so well. Over the last six months, sales rose 11% in comparison to the equivalent period from the previous year. Meanwhile, the cash Tiffany had to tie up in inventories actually declined by 1%. Think that's good? Drilling down further, Kowalski advised that in the most recent quarter, inventories of finished goods declined slightly against year-end 2004. Meanwhile, raw materials and work-in-progress inventories grew 2%.
The big picture, therefore, is that Tiffany is showing strength in working capital management, with demand for its products pulling them off the shelves faster than Tiffany can -- or at least needs to -- restock. And where inventories are growing at all, it's in the supplies of components needed to create more jewelry to sell -- the jewelry itself, once manufactured, continues to sell rapidly. A continuation of this trend is exactly what we'll hope to see tomorrow.
Competitors:
- Zale (NYSE:ZLC)
- Signet (NYSE:SIG)
- Saks (NYSE:SKS)
- Nordstrom (NYSE:JWN)
- Federated (NYSE:FD)
- Blue Nile (NASDAQ:NILE)
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Fool contributor Rich Smith does not own shares of any company named above.
