KORS

Tiffany Dazzles in Second Quarter; Coach Now Yielding ~4%

by

Be sure to catch Valuentum’s Brian Nelson discussing Tiffany’s reports on CNBC Asia at 9:30 PM CST today. The video clip will be posted to the website as soon as it is made available. Luxury jewelry maker Tiffany (TIF) reported fantastic second-quarter results Wednesday and raised its bottom-line guidance for the second time this year and in as many quarters. Tiffany has been benefiting from a modernization of its classical jewelry line-up thanks to the ongoing success of its newest ATLAS collection (shown right) and TIFFANY T jewelry collection (shown below). The ATLAS collection is named for the mythic Greek god and showcases Roman numerals in designs symbolic of strength and freedom on pieces ranging from pendants and earrings to … Read more

Valuentum Economic Castleâ„¢ Rating Update

by

Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Tiffany and Nike Disappoint in China

by

Valuentum previously outlined the importance of brand strength in its comprehensive piece: “Valuentum’s Comprehensive Report on Retail Brands.” This article will focus on Tiffany’s (TIF) and Nike’s (NKE) performance in the Asia-Pacific, and where applicable, China, a country that we believe is vital for long-term expansion and to support our fair value estimates of both firms. Recent reports have put a damper on the outlook for luxury spending in China during 2014. Though the outlook is consistent with data points we’ve received with respect to slowing, but still robust, economic expansion in China, the commentary is worth nothing: Wealthy Chinese are likely to buy fewer luxury goods again this year after the steepest cut-back on spending in at least five … Read more

Tiffany’s Bottom Line Sparkles in 3Q; Pricing Power Evident

by

Tiffany’s (TIF) third-quarter results, released Tuesday, showed solid revenue expansion and fantastic operating leverage. Worldwide net sales jumped 7% on a reported basis and 11% on a constant-currency basis; comparable sales advanced 7%. Reported sales in the Americas region increased 4% thanks in part to growth in Tiffany’s New York flagship store. In the Asia-Pacific region, reported revenue leapt an impressive 27%; comparable sales in the region jumped 22%. Negative currency impacts hurt reported sales in Japan, but underlying, constant-currency performance in the country was solid. Even in Europe, a region that continues to struggle for economic expansion, Tiffany revealed 7% reported growth thanks in part to strength in the United Kingdom. The company’s profit margin performance was also wonderful … Read more

With North America Saturated, Coach Needs International Growth

by

As has become the norm for Coach (click ticker for report: ), shares of the handbag and fashion accessory maker experienced heightened volatility after it reported lackluster results for its fiscal year 2013 fourth quarter Tuesday. Revenue increased 6% year-over-year to $1.2 billion, slightly below consensus estimates. Earnings per share advanced just 3% compared to the same period last year, coming in at $0.89 (after adjusting for one-off items). Free cash flow for the fiscal year was strong at $1.2 billion, an increase of 20% compared to the prior year and equal to 24% of total revenue. One thing is certain at Coach—the core North American business likely won’t be the same growth driver it has been in years past.  … Read more

Michael Kors’ Third Quarter Reveals Strength

by

On February 12, fast-growing retailer Michael Kors (KORS) announced spectacular fiscal year 2013 third quarter results. Revenue surged 70% year-over-year to $637 million, exceeding consensus expectations. Earnings were also fantastic, jumping 220% year-over-year to $0.64 per share, considerably above consensus estimates. Strength at the aspirational luxury brand hasn’t slowed yet, with same-store sales jumping 41% year-over-year, even as the company added 66 net new stores—a stark departure from competitor Coach (click ticker for report: ), which has struggled to compete with Michael Kors. Gross margins, while still well below those at Coach, jumped 80 basis points to 60.4%, reflecting the firm’s increase in its store base (as well as fewer discounts and a favorable shift in product mix). Though we … Read more

Coach’s Momentum Is Slowing

by

Aspirational luxury brand Coach (click ticker for report: ) announced lackluster results for its fiscal year 2013 second quarter and the holiday season. Revenue increased just 4% year-over-year to $1.5 billion, short of consensus expectations. Earnings missed the mark by several cents, growing just 4% year-over-year to $1.23 per share. Our fair value estimate remains unchanged. Gross margins remained basically unchanged year-over-year at 72.1%, suggesting the company did not take markdowns during the quarter. Unfortunately, the firm’s 4% sales expansion trailed the 15% increase in inventories, which could indicate that markdowns may come eventually. We could see a gross margin figure meaningfully lower than the current low-70’s run-rate in the coming periods. Inventory growth was among the primary reasons why … Read more

Coach Returns to Growth after a Weak Fourth Quarter

by

Aspirational luxury brand Coach (click ticker for report: ) reported strong earnings for its fiscal year 2013 first quarter Tuesday morning. Revenue and earnings were roughly in-line with expectations, with revenue growing 11% year-over-year to $1.16 billion and earnings expanding 5% year-over-year to $0.78 per share. The company also announced a $1.5 billion share buyback program. After a rough fourth quarter, North American same-store sales rebounded, growing 5.5% year-over-year, driving total sales up 8% to $784 million. This compares to the firm’s anemic 1.7% same-store sales growth during its previous quarter. Department store sales in North America were flat, though the stores ordered fewer inventories than a year ago. Coach’s Legacy collection, which CEO Lew Frankfort highlighted in the press … Read more