Analysts View Chinese Demand as Strong Opportunity for Tiffany

Tiffany & Co. will benefit from China's increasing demand for jewelry coupled with the country's low rate of diamond penetration, especially as marriage rates increase, according to Sterne Agee analysts Ike Boruchow and Tom Nikic, cited by Rapaport.
Sterne Agee's rating on Tiffany & Co. is set at "Buy" with a 12-month price target of $105 per share and earnings per share (EPS) of between $4.10 and $4.60 for the 2014 and 2015 fiscal period. Tiffany & Co.'s shares closed 29 cents lower to $86.65 in New York on April 18.
"We continue to believe that Tiffany is one of the most compelling opportunities in our space, given multiple ways to win (Asia growth, domestic turnaround, highly visible gross margin opportunity), and we would be buyers on recent weakness," which is down 10 percent from the peak, according to the analysts.
The analysts believe that Tiffany & Co. will benefit from not only macro tailwinds within China, such as increasing consumer affluence, but also the company's internal strategies to focus more heavily on the bridal category. "As these structural trends continue to play out over the long term, China should become an increasingly material piece of the global story," according to the analysts.
A decade ago, Tiffany & Co. operated one store on the mainland and 11 in all of Greater China, but today it operates 26 stores on the mainland and 45 in Greater China. Given this, Sterne Agee estimates revenue from China has increased from just about $100 million in 2008 to about $500 million in 2013.