TIFFANY CoBUSINESS ANALYSIS VALUATION USING FINANCIAL

Topics: Stock, Revenue, Stock market Pages: 9 (497 words) Published: December 9, 2014
TIFFANY & Co.
BUSINESS ANALYSIS & VALUATION USING FINANCIAL STATEMENTS
Chenyin Shen
ACCT 5391
Texas A&M University – Corpus Christi
Company Overview

Accounting Analysis

In New York City in 1837, Charles Lewis Tiffany and
John F. Young founded Tiffany and Young, a store
dedicated to selling stationery and costume jewelry.
Products include:
•fine and solitaire jewelry;
•engagement rings and wedding bands;
•non-gemstone, sterling silver, gold, and metal
jewelry.

January 31 as fiscal year end based on seasonality

Tiffany & Co. headquarter in New York
Company operates 289 retail stores
Industry Overview
SIC Code 5944 - Jewelry Stores
Fine jewelry and watch sales in the U.S. grew to
$80.1 billion in 2013
Jewelry sales increased 6.7% over 2012 to reach
$70.65 billion
Retail jewelry industry leaders:
•Signet Jewelers Ltd.
•Tiffany & Co.
•Blue Nile Inc.
Business Risk Analysis
Porter five forces analysis
Rivalry among existing firms
Threat of new entrants
Threat of substitute product
Bargaining power of buyers
Bargaining power of suppliers

Moderate
Low
Relatively high
Low
Very high

Ratio Analysis

Principal Accounting Policies
•Revenue recognition
‒Sales recognized at the "point of sale"
‒Gift cards and merchandise credits revenue
recognized upon redemption
‒Maintain reserve for potential product returns
•Inventory valuation
–Average Cost method
•Income taxes
–Asset and liability method
•Depreciation and amortization
–straight-line basis
Accounting Strategy
•Ownership structure
Management do not retains a majority stake of
common stock shares in the company
Percent of Class %
Insider Shareholders
Institutional Shareholders

TIF
1.6
78.22

SIG
0.45
84.36

NILE
5.2
99.8

Liquidity
Current Ratio
Quick Ratio
Receivable
Turnover
Inventory Turnover
Profitability
Gross Margin
SG&A / Sales
Net Profit
Margin
Assets Trunover
Operating ROA
ROE
Capital Structure
Debt-to-Equity
Net-Debt-toEquity
Interest
coverage
(earnings basis)

Key Assumptions

2009 2010 2011 2012 2013
3.40 4.07 5.59 4.61 5.38
0.54 1.57 1.93 0.99 1.16
16.48 19.44 19.59 20.61 23.17
0.74

2009
56.47%
40.22%
9.77%

0.88

2010
59.06%
39.79%
11.94%

0.92

2011
59.05%
39.60%
12.06%

0.79

2012
57.01%
38.64%
10.97%

0.76
2013
58.06%
38.60%
4.50%

1.16
1.49
1.56
1.28
1.18
12.93% 19.56% 20.12% 15.32% 6.62%
16.67% 19.56% 20.17% 17.72% 6.98%
2009 2010 2011 2012  2013
57.25% 51.68% 41.59% 44.73% 50.81%
47.15% 9.96% 7.57% 26.26% 31.34%
8.07

11.08

14.69

11.90

5.07

Quality of Disclosure
Provide adequate
Potential Red Flag
No apparent sign of red fags
Conclusion
Slight chance to manipulate financial statements

Net debt / market value of net capital
Market risk premium
Risk free rate
Tax rate
Cost of debt
Implied debt beta
Common equity beta
Implied asset beta
Equity Valuation
DCF Valuation of the Equity
PV of FCF to Equity (years 1-15)
+PV of FCF to Equity beyond Year 15
= Value of the Equity
Number of shares outstanding (MM)
Estimated value per share
Abnormal Earnings Valuation of the Equity
PV of Residual Operating Income
(years 1-15)
+ PV of Residual Operating Income
beyond Year 15
+ Beg. Book Value of Equity
= Value of the Equity
Number of shares outstanding (MM)
Estimated value per share

25.0%
5.7%
1.4%
35.0%
4.4%
0.53
1.76
1.45

2,715,249
6,099,757
8,815,006
128,312
68.70

1,781,538
4,313,031
2,720,437
8,815,006
128,312
68.70

Estimated Value per share
68.70
Stock Price

Ratio Analysis

end Jan,31 2014
83.19

Competitive Strategy Analysis







Differentiation
Enhance customer awareness of the Tiffany & Co.
trademark
Maintain active product development program
Enhance customer experience with superior
customer service and through engaging store
environments
Selectively expand global distribution
Increase store productivity...
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