Tiffany & Co. (TIF) Stock Purchase and Analysis

I finally used my free automatic investment credit with my Capital One brokerage account, along with what was left of the cash I had sitting there. I do still have another free credit in my Roth, which I need to use up before the end of the year. I ended up adding to the tiny position I had bought in Tiffany & Co., earlier in the year which is actually up like 17% or so…boss status achieved. Anyways, I barely got any sleep last night and woke up before sunrise, which got me thinking (in my sleep deprived limited capacity) about future investments as well as other sources of income. I woke up to find an extra $63 and change in one of my affiliate accounts, which boosted me up to somewhere around $85-90 in passive income for the day yesterday…Plus, I got an email yesterday about updating another affiliate account from an old website, so that they can release the funds that have accumulated. My online income has gotten extremely steady at this point, growing, and into the five figures…so I figured I’d write a whole long post about creating streams of cash online. Should be cool.

Beyond all that, I am starting to look at investing in Nestle through their DRIP program, which means I’ll have to buy shares and have my brokerage transfer them into the program. However, once they are there, automatic investing is basically free for this European divided machine. There’s starting to be more and more I want to buy in terms of stocks such as more Diageo, PSX, Nestle, Nike, etc. BUT I still have to pay so many more real world expenses before the end of the month, that I’ll probably hold off.

Below is my Tiffany purchase recap, as well as, some interesting tidbits that I found while reading through their 10K and 2nd quarter news release.

Today’s Purchase 

TIF- 5.0301 shares @ $71.954, yield 2.5%

Increases forward dividends by $9.05

Jewelry represented 92-93% of worldwide net sales during the years 2013-2015. 7% of sales were from fragrance, china, leather goods, and other accessories. While wholesale and licensing agreements totaled roughly 1%. Marketing spending accounted for between 6.3-7.4% of worldwide net sales during the years 2013-2015. After the Swatch debacle a few years back, management seems bullish on Tiffany watch sales in the future, and taking the next few years to establish the line. It will be interesting to see whether or not that adds a significant stream of revenue for the company.

Below is the breakdown of sales by region, Japan is about equal in net sales with China…seems like there is plenty of space to grow, along with the Chinese economy.

2015 Regional Net Sales Breakdown 

Americas: 47% Net Sales (88% of sales in USA)

Asia-Pacific: 24%  (more than half in China)

Japan: 13% 

Europe:12% (UK sales approx 40% of Europe total)

Other: 4% (includes emerging markets, wholesale diamond sales, licensing agreements). An interesting aside, while reading the 10K, is that they have a licensing agreement with Coty to develop a new line of branded fragrances. This is supposed to replace an older line developed with Chanel. It will be interesting to see how this plays out and if this could provide a solid revenue stream by revamping or releasing new fragrances. No news as of yet, though.

2016 First Half Reported Sales vs. 2015 (GAAP Reported and Constant Exchange Rate Basis)

For the first half of 2016 worldwide sales are down 7% using GAAP and down 6% on a constant exchange rate basis.

Americas- GAAP: -9%, Constant Exchange: -8%

Asia-Pacific- GAAP: -7%, CE: -4%

Japan- GAAP: +9%, CE: -2%

Europe- GAAP: -11%, CE: -7%

The currency effect on reported revenues in Japan is crazy…11% swing. One thing to note is that total items sold are down but this is due to a fall in sales of their lower priced silver jewelry offerings while they have been selling more of the high end pieces. Also, management has expected mid single digit sales declines since last year and gives the reason of Chinese slow down and fewer sales from tourists visiting their stores…which is apparently is a substantial part of their sales.

Retail stores increased from 154 in 2005 to 307 in 2015. Through July 31, 2016, the company has upped that number to 311 total retail stores worldwide.

Dividend Increases

2011- $0.28 per share quarterly

2012- $0.3125 per share quarterly

2013- $0.335 per share quarterly

2014- $0.38 per share quarterly

2015- $0.40 per share quarterly

2016- $0.45 per share quarterly

60.71% increase since 2011. Awesome.

Share repurchases from November 1, 2015 through January 31, 2016 totaled 1.4277 million shares at an average cost of $72.96 per share. For the first half of 2016 through July 31st, the company repurchased 2.3 million shares at an average cost of $65 per share. $344 million remains allotted to repurchase stock through 2019. It looks as though, this $500 million repurchase plan should retire somewhere between 4-6% of the stock in most scenarios. TIF started the year with 129.1 million shares outstanding, which means they were roughly at 126.8 by the end of July.

That’s what I like to see, management taking advantage of a decline in prices to buy back stock and increase shareholder value.