Investopedia: Tiffany Continues To Execute At A Higher Level

As premier jewelery retailer Tiffany (NYSE:TIF) continues to beat expectations, it's getting harder to argue that the Street overvalues the company's brand and future cash flows. Not only is the company outperforming in difficult markets like Europe, but efforts to improve operating performance seem to already be delivering results. Factor in an eventual improvement in the Americas and future growth in businesses like watches, and I can understand why Tiffany is a popular pick. I'm personally not willing to chase Tiffany up at these levels (particularly when it seems like 20% to 30% pullbacks are routine), but it's hard to argue with a company that is performing at a pretty high level despite what should be a tough global environment.

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Investopedia: Tiffany Logs A Big Beat, But Fiscal 2014 Still A Work In Progress

I suspect that Tiffany (NYSE:TIF) is over-hyped as a bellwether for the consumer confidence of the well-to-do, but the reality is that it's still a large and well-followed retailer. To that end, the strong comp growth here this quarter was a welcome change of pace for what has been a relatively unimpressive run in retail.

First Quarter Results Come In Strong
Tiffany certainly did better than Wall Street's sell-side expected this quarter. Even so, management kept a lid on guidance – likely a prudent move given a spate of disappointing recent guide-downs and uncertainties over product repositionings.

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Investopedia: Aspirational Shoppers Trip Up Tiffany

When you're a public company, investors' appetite for growth has to be taken into account when it comes to business strategy. I suspect this is part of the reason so many publicly-traded luxury brands have spent the last two decades targeting that "mass affluent" market. While that approach has generally earned these companies quite a lot of money on balance, it may have been part of what tripped up Tiffany (NYSE:TIF) this quarter. Even with the disappointment, though, this is still not what you'd call a cheap stock.

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Investopedia: Is It Time To Hitch Up The Coach?

As a seller of something that many people want, but nobody really needs, Coach (NYSE:COH) is an interesting economic barometer in its own right. Like so many other semi-luxury or luxury brands, Coach knows how much of its future growth rests in China, but the company must also find that sustainable niche of "affordable luxury" that is so hard to maintain in the North American market. While economic weakness is going to have a disproportionate impact on Coach, this stock is a name to watch as a rebound play for when conditions and sentiment turn more positive.

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Investopedia: A Sizable Miss Probably Won't Keep Tiffany Down For Long

Some stocks defy conventional fundamental analysis, and Tiffany (NYSE:TIF) is one of them. Tiffany has one of the most-recognized brands in the world, a solid history of double-digit returns on capital, and some of the best per-square-foot metrics in retail. On the other hand, the company has never been a consistent or impressive free cash flow generator, and the stock is generally a proxy for the financial health and spending of the upper class.

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Investopedia: Lululemon - Does Success Have To Make Sense?

For all those wishing to suggest that the so-called "Great Recession" has permanently changed consumer spending behavior and value assessment, I would present Lululemon Athletica (Nasdaq: LULU). Here is a company that has continued to grow at an impressive clip throughout this downturn and has achieved over $200 million in quarterly revenue on the basis of convincing people to pay $100 for sweatpants (very nice and comfortable sweatpants, I'm told, but still basically just upgraded, bum-sculpting sweatpants). Now the question is how long the company can maintain the momentum in its sales and the anti-gravity in its valuation. 

Second Quarter Results Very Limber  
Lululemon had another startlingly good quarter from a growth perspective. Revenue rose more than 39%, with same-store comp sales up 20%. What makes that notably impressive to me is that revenue rose 35% year on year in the first quarter (with comp growth of 16%) - so even though consumer confidence and retail spending seems to be getting worse, Lululemon continues to grow apace.


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Investopedia: Today Not A Typical Williams-Sonoma Market

Higher-end retailer Williams-Sonoma (NYSE:WSM) has a problem. It's not a merchandise quality problem or an in-store experience problem. It's not a substitution problem; people still cook and use furniture. No, the problem for Williams-Sonoma is more of a consumer disposable income problem - there is nothing in a Williams-Sonoma store that people cannot live without, and as surveys from the National Retail Federation continue to show, people are trying to stretch their income further by shopping more at places like Wal-Mart (NYSE:WMT) and Bed Bath & Beyond (Nasdaq:BBBY) and less at places like Williams-Sonoma.

Cracks Showing in Q2?  
Although Williams-Sonoma management decided to issue an earnings press release talking about "strong" earnings in the title, investors can be forgiven if they don't see it as such a strong release. Revenue came in at the lower end of analyst expectations, with reported growth of just a bit more than 5%. While in-store retail growth was pretty anemic (less than 1%), direct-to-consumer sales were up 13% and internet sales (part of DTC) was up nearly 19%. 

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Investopedia: Coach Still Flying First Class

Some things never change, including consumer behavior. Maybe the great housing boom/bust did force a few consumers to change their ways, but as the economy has rebounded, the demand for high-end consumer goods has gone along for the ride. As one of the more popular brands around, Coach (NYSE:COH) continues to deliver solid financial performance. 

On Target Performance 

Even with the significant impact of the Japanese earthquake, Coach once again managed to modestly beat estimates. Revenue rose 14% this quarter, fueled by direct-to-consumer sales growth of 15%. North American comps were up about 10% (and ahead of expectations), while Japanese sales fell 9% in local currency. Such was the impact of currency moves, though, that Japanese sales were actually flat on a reported (dollars) basis.

Coach did not perform quite as well on the profitability side. Like so many companies, Coach is seeing pressure from currency, materials, shipping, and so forth. Gross margin declined about 140 basis points, while operating income (on a non-GAAP basis) rose 12%. Still, it is clearly worth noting that at over 29%, Coach produces exceptionally good margins (as well as very high returns on assets and capital). 

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Lululemon Masters The Upward-Profits Pose

I am not aware of a "ring the cash register" pose in yoga, but if there is one, I have no doubt that Lululemon Athletica (Nasdaq:LULU) has mastered it. Combining a healthy living and pro-environment shtick with truly well-designed, well-crafted and well-marketed apparel, Lululemon is carving out a very successful niche in women's athletic apparel market and driving value-centered investors to distraction. 

A Limber Third Quarter
It is a real challenge to find a metric in which Lululemon did not excel in its fiscal third quarter. Revenue jumped almost 56% to $176 million, leaving the highest published estimate in the dust. Likewise, comp-store sales growth of 29% was outstanding and the company produced an eye-popping amount of productivity (nearly $2,000 in sales per gross square foot of selling space, on an annualized basis). Sure, that's less than what, say, Tiffany (NYSE:TIF) does, but they sell diamonds! Compared to other clothing retailers, even solid performers like Urban Outfitters (Nasdaq:URBN) or Limited's (NYSE:LTD) Victoria's Secret cannot come close to that level of performance. 


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No Recession In High-End Goods

The regular cornerstone franchises of most American malls like Dillards (NYSE:DDS) or J.C. Penney (NYSE:JCP) may not be seeing great consumer interest, but the luxury side of retail seems to be making a solid comeback. This is why, with an update on third-quarter sales Thursday, it's pretty clear that French luxury giant LVMH (Nasdaq:LVMUY.PK) is once again doing well among the well-to-do. 

Double Digits Across the Board
While LVMH only gave a partial update (sales, not profits), that update was nonetheless very positive. Total sales climbed nearly 24% as reported, with organic sales growth of 14%. That was a fair bit better than the already-healthy analyst expectation of 11% organic growth.


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