Wall Streeters and other big spenders may not be shopping much at Tiffany (TIF
) on Fifth Avenue this Christmas. The company's flagship store turns in about a quarter of total U.S. sales, but its yearend revenues, like bankers' bonuses, could sag. Shares jumped on Nov. 13, to 26.6, however, when third-quarter operating earnings beat estimates by a penny. Still, the company has trimmed fourth-quarter profit and sales forecasts, and the stock is down 34% since May.
Next year, Tiffany could be a real gem, says Chris Wiles of Strong Capital Management, as the economy firms up and as the jeweler expands. Toronto's Aber Diamond (ABER
), in which Tiffany holds a 14.7% stake, will start producing from its mine in early 2003. Tiffany will buy $50 million worth of stones, one-third of its annual needs, from Aber and will also open its first diamond-cutting plant. In addition to all this, Tiffany is cash-rich with low debt. "This is an extremely high-quality company, with a near-pure balance sheet," says Wiles, who manages $200 million in large-company stocks, including a small stake in Tiffany. He figures that, with a price-earnings ratio of 17.6 based on 2002 estimates, Tiffany sells at a 10% discount to the market. He says the stock could hit 40 next year.
A newly acquired jewelry chain for the Caribbean cruise set, the November debut of a Paris store, and a fresh line of Tiffany watches are also pluses. Says Anne-Marie Peterson of Thomas Weisel Partners, who owns stock in her personal accounts: "There's a lot moving in the right direction."
Gene Marcial is on vacation.
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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