Tiffany & co. and Coach, Inc.
Prepared for: Rodger Klee
Prepared by: Ann Henkelman and Jen Thompson
June 26, 2012
Table Of CONTENTS:
Tiffany & co. and Coach, Inc.1
Table Of CONTENTS:2
Introduction and Company Profiles2
Tiffany & Co.3
EMV, MVA, and the Valuation of Common Stock5
Introduction and Company Profiles
Tiffany & Co.
In 1837, men named Charles Lewis Tiffany and Teddy Young opened a store that sold stationery and fancy goods emporium in in downtown Manhattan. They named the store Tiffany, Young, and Ellis. In 1853, Charles Tiffany took control, shortened the company name to Tiffany & Co, and decided to put its emphasis on jewelry. Over time, it has grown into more than 250 stores, with 9,800 employees, and is publicly traded on the New York Stock Exchange. Today, Tiffany is a high-end jeweler and specialty retailer. The single most important asset of the company is the Brand. The strength goes beyond the trademark, and is driven by how consumers perceive it. Management believes that consumers associate the Brand with high-quality products, elegant stores and online environment, and their custom packaging- the Tiffany & Co. Blue Box. Going forward, it is management’s goal and business plan to maintain and continue to strengthen the company’s Brand. Tiffany’s CEO is Michael Kowalski. He has been with the company since 1983 when he took his first position as Director of Financial Planning, and then continued to gain broad exposure by holding a variety of management positions. He assumed the role of Chairman of the Board in 2003, following William R. Chaney, and has grown the company’s revenue 9.94% per year and earnings per share (EPS) 14.51% (both compounded annually). Mr. Kowalski is not the only member of management who has had a long tenure with the company, the average of the entire management team is 19.5 years. This is exceptionally stronger than their peer average of 9.8 years. The experience and dedication of the management team has shined in the past few years. The global economy has suffered from one of the biggest financial crises and overall slowdowns ever. Throughout these hard times, the management team has continued to show strong numbers. Since 2007, the return on investment capital (ROIC) has averaged 16.7% and return on equity has averaged 16.48%. These percentages are both above the weighted average cost of capital of 11.28%, which shows that this company has created value in one of the hardest economic times. Tiffany’s merchandise primarily consists of jewelry (91% of net sales 2011), as well as timepieces, china, stationery, crystal, sterling silver, fragrances, and other accessories (see Figure 1-1 below). The Company sells their product in operated stores worldwide, on the internet, and through wholesale operations. The majority of Tiffany’s sales (50%) are from the Americas region, with the U.S. contributing 90% of that figure. The other regions that Tiffany & Co. operates in are, as follows: Asia-Pacific (21%), Japan (17%), and Europe (12%). See Figure 1-2 and 1-3 below for a value and percentage breakout of product sales in each segment (as of 2011).
Looking forward, the maintenance of the Brand is always under management’s goals. Tiffany’s product lines are a classic positioning that supports the Brand, so there is limited display space that can be allocated to new product introductions. The specific niche of products is enough to maintain its position within the high-end jewelry market. Tiffany’s Chief Operating Decision Maker (CODM) regularly evaluates the performance of its reportable segments on the basis of financial performances of net sales and continuing operations. This is how the...