Tags: Tiffany | TIF | SWGAY | LVMUY

Tiffany & Co. Vaults Ahead, Despite Economy

By Meghan Sapp   |   Monday, 03 Oct 2011 03:11 PM

Times are hard for everyone in this global economic mess. Well, not everyone it seems. The world’s second-largest jeweler, Tiffany & Co. (TIF), has managed to increase net sales by a quarter during the first half of the year and show no signs of slowing down.

In fact, since the end of the recession in the United States in 2009, the market value of TIF has tripled to $8.5 billion. Its stock price was up more than 166 percent in the period through mid-September. The biggest growth in Tiffany’s American sales segment during the second quarter was among products valued at more than $20,000 and at more than $50,000.

What this means is that rich people will always be rich, no matter the economy, and Tiffany has brand recognition that they reach for. That brand strength has gone global in recent years with domestic and international sales now roughly equal. Tourism sales, especially in flagship department stores, are especially strong, with Chinese tourists seeking out Tiffany diamonds on European shopping trips.

Serious Chinese shoppers won’t have to wait for trips to Europe for long. The company plans to have 25 to 30 new stores there in the next three years or so, according to the China Daily newspaper. There are currently two stores in Beijing. In a nod to its roots in New York City, the company will open its third New York City store in Soho in 2012 to celebrate its 175th anniversary.

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It’s not just the Chinese who are keen on Tiffany, however. After ending a joint venture with Swatch (SWGAY) to develop and market Tiffany watches, there are rumors that some luxury goods players are interested in snatching Tiffany up. LVMH Moet Hennessy Louis Vuitton (LVMUY) is the name most often tossed around, not surprising considering its current bid to buy up jeweler Bulgari for $5.2 billion.

If Louis Vuitton wants to add Tiffany to its global lineup of luxury goods, it’s going to have to shell out a lot of cash. Analysts estimate that a buyer would have to pay a premium between 30 and 40 percent in order to satisfy current investors’ demands for a company that is set to grow by 30 percent in the next handful of years alone. That would put a valuation on the company anywhere between $11 billion and $13 billion.

Goldman Sachs recently raised estimates and its price target on Neutral-rated Tiffany & Co. to $72 from $67 following better than expected second quarter results.

Tiffany’s reports its third quarter earnings on or around Nov. 29.

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