Michael Kors Is Trumping Tiffany in Luxury Retail: Analyst

Tiffany Gift Box
Photo By: minxlj
Tiffany Gift Box

After missing on earnings Tuesday, Tiffanyis planning an aggressive sales strategy across America.

Weak 2011 holiday sales in Europe and the U.S., led to the first earnings miss in the last six quarters.

“They say sales have accelerated since then, but the company will need to see at least 10 percent growth in the Americas to hit their numbers,” said Laura Champine, retail analyst at Collins Stewart.

Champine has a “neutral” rating on the stock, and does not readily see how 10 percent growth will be achieved.

Last year’s “strong sales growth was mostly on pricing. So either they have to continue raising prices, which is unlikely, or they need to see transactions ramp in the back half of this year,” she said. “I’m not sure you can count on that.”

Meanwhile, Tiffany is planning its rebound. The company operates 247 stores worldwide and plans to open another 24 this year, nine of which will be in the Americas.

The pressure for bold moves is high in the U.S., where other luxury retailers are picking up speed.

Accessories retailerMichael Kors Holdings, for instance, raised its fourth-quarter outlook amid strong demand for luxury goods. Its same-store sales are up a staggering 36 percent, pushing shares up near 130 percent since the company went public in December.

“I am seeing a lot of Kors everywhere in retail,” Champine said. “I think that brand has just expanded distribution enormously. We'll see if they can lap that in 2012.”

That said, Standard & Poors equity analysts rated Tiffany a “buy” on Tuesday.

“Given strong momentum in Asia and our improved outlook for the Americas, we think TIF’s guidance for a 10 percent global net sales gain is achievable,” the company said in a statement.

Last quarter’s U.S. sales were hurt by a drop in Wall Street bonuses, but other markets may help pick up the slack. The company says it expects fiscal-year global net sales to be up 10 percent, led by gains in both Asia and the Americas.

Additional News: Tiffany Profit Falls Short; Sees 2012 Sales Up
Additional Views: Michael Kors Shares Soar on Blowout Earnings______________________________

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Laura Champine does not personally own shares in TIF or KORS. Collins Stewart does not have a banking relationship with either company.