Buy yourself something pretty
You may still be shaking your head. What about all the teenagers and single women, why are they buying themselves designer items? Wang further adds, “Many single women obviously want designer products, but instead of these products saying back off my current man, the single woman is saying back off my future man.”
While women don’t typically buy themselves rings, the conclusion still applies for watches and other forms of jewelry. Rivals assume that the woman’s partner bought it for her.
Tiffany & Co. (NYSE:TIF), the famed jeweler, has an unparalleled reputation worldwide. It’s been rumored to be a buyout target for years with several suitors bandied about such as French luxury company LVMH (Louis Vuitton Moet Hennessey). LVMH also owns a 17% stake in Hermes, maker of the Birkin bag, one of the most coveted purses around and costing thousands of dollars. Tiffany would certainly be a jewel in the crown for them.
But, Tiffany & Co. (NYSE:TIF) has been doing just fine, thank you very much. The company is celebrating its 175th anniversary this year with special promotions and also a Great Gatsby movie tie-in. Stifel upgraded it to a buy on July 15 with a $92 price target based on predicted success of the new Tiffany & Co. (NYSE:TIF) Sparklers line (the sparklier the better as a signal to romantic rivals!), and better domestic sales due to a bull market wealth effect.
I think that $92 may be optimistic as the median price target is $83.50, and revenue and EPS look to slightly surpass last year’s revenue of $3.75 billion and $3.27, respectively, with $2.13 billion in revenue and $2.07 EPS year to date. The company maintained its guidance for $3.53 diluted EPS, too.
Tiffany & Co. (NYSE:TIF)’s gross margin of 56.2% should begin to benefit from lower gold and silver prices, producing the majority of its pieces in-house. The company’s international sales have been strong this year, just reporting a Q1 increase of 9% for net sales globally and it’s looking to keep that going, opening 16 stores in the next year, of which only three will be in the U.S., adding to its total of 275 stores.
The stock is trading at a 24.35 trailing P/E with a 1.70% yield. However, its PEG at 1.82 is higher than both Michael Kors and Coach at 1.36.
What high end is signaling
Coach, Inc. (NYSE:COH) has overdone making the aspirational affordable. Sales in Asia will likely remain strong, but North American sales aren’t saying buy me. Michael Kors Holdings Ltd (NYSE:KORS) is still looking fierce by keeping it pricey and is undervalued relative to its growth. Tiffany & Co. (NYSE:TIF) is the most overvalued to growth, but the storied brand would probably not lose its luster.
The article Why High End Stocks Will Always Be in Style originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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