Ethan Miller
Tiffany & Co. released its quarterly results on Wednesday morning, and they certainly highlight why this stock is such a dynamo. As a jeweler, Tiffany is a high-end retail stock, of course, and it has been forced to confront high unemployment and weak consumer confidence - but judging from its financial results and its share price, you would never know we live in troubled times.
Net earnings rose 27 per cent in the third quarter and revenue rose 14 per cent, topping analysts' expectations. The company also raised its full-year forecast.
Meanwhile, the share price is a thing of beauty. The shares rose on Wednesday to their highest level ever, which is quite a feat given the economic backdrop. And while the broader U.S. market has been struggling to rise above its April highs, Tiffany's share price is now 17 per cent above its April level.
The company's success begs an explanation. Eddy Elfenbein at Crossing Wall Street offers this one: "Today's report is evidence that wealthy consumers are not only doing well, but willing to spend." Or, is jewelry something that consumers - wealthy or not - tend not to cut back on?
Keep in mind that Tiffany's longer-term track record is also something to behold, when you compare the stock to its benchmark (the S&P 500 consumer discretionary subindex) and the low-end of retail, Wal-Mart Stores Inc. Indeed, Tiffany has walloped Wal-Mart and its consumer discretionary peers over the past five years, three years, two years and one-year periods - and usually by wide margins.
For example, over the past five years, Tiffany has returned 52.1 per cent after factoring in dividends. That compares to a 17.5 per cent return for Wal-Mart and 17 per cent for consumer discretionary stocks. And over the past year, Tiffany has risen 49.8 per cent, versus Wal-Mart's 1.8 per cent gain and the 29.4 per cent gain by consumer discretionary stocks.
Jewelry, it seems, rocks.
David Berman