Tiffany Strategizes to Lift Sales, Innovates to Woo Buyers

As competition is intensifying in the retail space, Tiffany & Co. TIF is leaving no stone unturned to drive revenues. The company, which has a long-term expected earnings growth rate of 11.2%, is banking on several strategic initiatives to enhance customer base. The company's strategic endeavors have helped the stock to gain 8.5% compared with the industry’s decline of 1.2% in the past six months.

Tiffany is gradually coming up with new jewelry designs, range of watches and fragrance. It has also introduced “build-your-own program” on its website under which customers are allowed to personalize their charm bracelets. Also, Tiffany is allowing customers to customize rings.

Apart from this, the company renewed its licensing agreement with Luxottica Group — slated to expire on Dec 31, 2027 — for the development, production and global distribution of sunglasses and prescription frames.

 

These initiatives reflect the company’s customer-centric focus which is likely to help strengthen its customer base.

The company is focusing on opening smaller stores that offer select collections of low priced and high margin products. Tiffany also focuses on improving sales per square foot by driving customer traffic and converting visitors into buyers through targeted advertising, sales training and customer-oriented initiatives.

Management also intends to expand its distribution network by adding stores in new and existing markets. On the international front, the company is now focusing on expanding business in the Middle East, Russia, Canada, Mexico and Brazil.

However, despite the company’s efforts to boost the top line, rising SG&A expenses are likely to dent the operating margin. In this regard, we note that management expects fiscal 2018 SG&A expenses to increase at a rate higher than sales on account of increased spending on technology, marketing communications, visual merchandising, digital and store presentations. We noted that in the first, second, third and fourth quarter of fiscal 2017, SG&A expenses had increased 0.2%, 3.7%, 3.3% and 2.2%, respectively.

Given the pros and cons embedded the stock carries a Zacks Rank #3 (Hold).

3 Retail Stocks to Steal the Show

Macy's, Inc. M has a long-term earnings growth rate of 8.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordstrom, Inc. JWN with a long-term earnings growth rate of 6% carries a Zacks Rank #2 (Buy). .

Kohl's Corporation KSS has a long-term earnings growth rate of 6.7% and a Zacks Rank #2.

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