The market didn’t react one way or the other to this one. A couple of excerpts from that call (transcript courtesy Seeking Alpha):
Patrick F. McGuiness, CFO: “We believe that the sales and earnings growth plans that we have constructed for 2013 are achievable and the beginning of a turnaround from our disappointing 2012 results. However, we are not yet back to achieving our long -- longer-term objectives that continue to call for annual 10% to 12% sales growth and at least 15% earnings growth.”
Michael J. Kowalski, CEO: “Clearly, we were not pleased with Tiffany's financial results in 2012, which are not representative of how our company should perform in a more normalized operating environment. We faced more difficult-than-expected comparisons to some very strong sales results in 2012. We dealt with economic conditions in 2012 that were more challenging in some regions. We saw a pronounced softness in sales of entry-level-priced silver jewelry. And overall sales weakness led to a timing lag in realizing the benefit from a moderation in commodity costs.”
Much of what goes on in the market in the short-term is very much an expectations game. Here’s the link to Tiffany’s earnings release for 1Q2013 today:
Earnings of $0.70 per share (excluding items) on sales of $895 million smoked expectations of $0.52 per share on sales of $855 million. As such the stock is on an upswing today and based on when I bought shares in my TMF real money portfolio back on June 19, 2012 (http://www.fool.com/investing/general/2012/06/19/1-stock-im-gobbling-up-against-the-grain.aspx?source=irnsitlnk0000001) shares are now up more than 50% and beating the market soundly by more than 27 percentage points. Not only is management running the business well, but they are also managing expectations well and that can make all the difference in the world. Underpromise and overdeliver is far and away better than the opposite.
European sales growth of 8%, robust Asia numbers and a healthy showing in the Americas are all good indicators of spending maintaining at least a decent enough pace for the company to continue to grow. The drop in gross margin to 56.2% from 57.3% from a year ago is due to a shifting product mix to higher priced items that crimp the gross margin line a bit due to higher costs. Inventories are at a healthy level and management is maintaining guidance for the year; a smart move in my estimation. It would be really easy for them to come off of a decent quarter like this and up their guidance to cheerlead themselves. Plus it isn’t to say that conditions can’t or won’t change on the downside as the year goes on. That would more than likely hammer the stock from today’s levels of around 23 times full year estimates.
The bottom line is that Tiffany is not a buy at today’s prices. The buying should have been done back when I did it in June of 2012. Those who did are sitting on a nice 51% gain right now. But Tiffany is a solid business with an unbelievable global brand and a management team that seems to get it. I’d have this business perpetually on my watch list to buy in times of greatest pessimism.