With strong growth in a struggling retail industry, two high specialty retailers might be worth your due diligence. But which is the best — Tiffany or Michael Kors?
This high-end jewelry company thrives
Tiffany & Co. (NYSE:TIF) created new 52-week highs on Tuesday after the company announced earnings. The stock was the largest gainer on the S&P 500 with a 5% intraday pop.
Tiffany & Co. is a jeweler and specialty retailer whose principal merchandise offering is jewelry. With Tiffany & Co. (NYSE:TIF) having a global presence, investors were anxiously awaiting their quarterly report in an attempt to assess both high-end retail and the jewelry business as a whole.
While the company met revenue expectations for the quarter, the company’s earnings per share (EPS) of $0.70 beat expectations by $0.18. A large reason for this beat was the company’s Asia-Pacific growth of 15% year-over-year.
In the Asia-Pacific region, currencies have helped boost earnings in 2013. In particular, the Yen has remained strong. Translating Yen earnings to U.S. Dollars creates an earnings boost for the company.
As we look ahead, Tiffany & Co. (NYSE:TIF) is seeing solid gains in global comparable store sales of 8% year-over-year. The company is following the most recent trend of fundamental gains seen by other luxury high-end retailers such as Saks and the Swiss firm Richemont. With that said, the company looks to be performing strongly in all of its segments – which makes it very appealing.
Another high-end rapid growth option
Michael Kors Holdings Ltd (NYSE:KORS) just announced earnings today. The company reported Earning Per Share of $0.50 compared to $0.22 in the same period the previous year. In 2013, the company has seen its valuation increase 21%. Since its initial public offering (IPO) in December 2011, the stock has gained 155%; thus, producing a nearly continuous uptrend.
Michael Kors Holdings Ltd (NYSE:KORS) is a designer, marketer, distributor and retailer of branded women’s apparel and accessories. The company’s products are sold in Michael Kors stores and also in retail stores such as Macy’s and Nordstrom – with its handbag and wallets being very popular among high-end shoppers.
The company is in a hyper-growth stage, with its previous quarter producing revenue growth of 70% year-over-year. During its last five quarters the company has soundly beat expectations – always a result of significantly better than expected bottom line performance.
Looking at Michael Kors Holdings Ltd (NYSE:KORS) as a company, it is still quite small with under $2 billion in annual revenue. It has almost 250 stores in the U.S., 45 stores in Europe, and does not operate its own e-commerce website. Thus, the company has a great opportunity to expand and further bolster sales growth.
Which is the better opportunity?
Michael Kors Holdings Ltd (NYSE:KORS) and Tiffany & Co. (NYSE:TIF) are completely different types of companies; either of which I believe would make a great investment. Michael Kors makes handbags while Tiffany & Co sells diamonds. Thus, one might suggest that since “a diamond is forever” that Tiffany & Co. is the better long-term investment.
As we’ve seen with Coach, Inc. (NYSE:COH) — and its near 20% one-year loss – a trend can change very quickly for high-end apparel companies. With that said, Michael Kors Holdings Ltd (NYSE:KORS) is still in its growth phase. The company is gaining momentum with explosive year-over-year growth. Yet, the company is fairly cheap — trading at 25 times next year’s earnings – compared with Tiffany & Co. (NYSE:TIF) trading at 20 times next year’s earnings with much slower growth.