Tiffany & Co. sees an unprecedented opportunity to grab market share from jewelers that have succumbed to recession, and some analysts predict the stock will jump higher as the chain wins clients from fallen rivals, according to www.bloomberg.com.
“With the number of bankruptcies and reorganizations in the industry, we are hopeful our sales can outpace the economic recovery,” Chairman and Chief Executive Officer Michael Kowalski said in an Aug. 28 telephone interview. “I have been here at Tiffany for 25 years, and in my own personal experience, we have not encountered an environment which we believe provides the long-term opportunity that this one does.”
Tiffany can capture sales in a $150 to $25,000 price range, with diamond jewelry a primary category, Kowalski said. The company is opening smaller stores, adding new jewelry designs and offering more products online. It is seeking to pick up better locations at lower rents as well as managers and sales staff, the 57-year-old CEO said.
The strategies may help boost Tiffany shares by as much as 20 percent within 12 to 18 months, analysts project. Brian Nagel at Oppenheimer & Co. raised his target share price to $45 from $38 after the company reported higher-than-estimated profit last week. Barclays Capital’s Robert Drbul increased his by $2 to $42, and Dorothy Lakner at Caris & Co. by $4 to that level. The analysts, all based in New York, rate the stock “outperform,” “overweight,” and “above-average,” respectively.
With the U.S. jewelry industry consolidating, about $1.8 billion of the market may become available to Tiffany, Oppenheimer’s Nagel wrote in an Aug. 21 report. Grabbing 30 percent of that could add as much as $1.29 to running annual earnings per share, he wrote.
Tiffany had 5.5 percent of $28.3 billion of 2008 sales at U.S. stores that specialize in jewelry, and ranked third behind Signet Jewelers Ltd.’s Sterling Jewelers Inc., and Zale Corp., said Ken Gassman, president of the Jewelry Industry Research Institute. Tiffany, the world’s second-largest luxury jewelry seller, trails Cie Financiere Richemont AG, owner of Cartier and Van Cleef & Arpels, in global sales.
Given declines in luxury spending, Gassman says Wal-Mart Stores Inc. is in a better position to benefit than a specialty jeweler such as Tiffany.
This year through the end of June, 917 jewelry companies discontinued operations versus 523 at the same time a year ago, and 65 were in bankruptcy compared with 29, according to the Jewelers Board of Trade.
Finlay Enterprises Inc., a New York-based jewelry retailer founded in 1887, filed for bankruptcy on Aug. 5 and said it would hold an auction to sell its business and assets. High-end jeweler Fortunoff Holdings LLC filed for bankruptcy in February.
The smaller shops Tiffany is opening help it capture customers by allowing it to enter markets that couldn’t support a bigger store and to increase its presence in existing markets, said Mark Aaron, a company spokesman.
The company also plans to expand its 76 regular-sized U.S. locations to 100 by 2016, according to Aaron.
The jeweler’s products win customers because they are “classic” and not “fashion,” David Schick, a Baltimore-based analyst with Stifel Nicolaus & Co., said. “Tiffany does seem well-positioned to take market share,” said Schick, who notes the 172-year-old company’s longevity. “Tiffany has been through the Civil War, two World Wars and the Great Depression.”
