Te-Chi KuoCheng-Yuan Huang

Yu-Te HungMin-Min ChenPo-Chieh Shih

Date: April 24, 2012

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• Introduction• Macroeconomics• Stock Market Prospect• Industry• Business• Financial Analysis• Competitors• Comparable Analysis• Financial projection• Recommendation

Agenda

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Introduction

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• GICS Map: 25504040 (Specialty Stores)• Current Price: $67.00 (4/23/2012’)• P/E: 19.58• Forward P/E: 14.60• Market Cap: 8.41B• 52wk Range: 56.21~84.49

Introduction

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Macroeconomics

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Macroeconomics

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Macroeconomics– the U.S.

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Macroeconomics

Source: http://research.stlouisfed.org/fred2/ 8

Stock Market Prospect- Diamond Price

$21,000

38%

Source: www.ajediam.com 9

Stock Market Prospect - Gold Price

140%

Source: http://www.kitco.com 10

• Revenue: 30.2B • Annual Growth(11~16):3.1%

Industry

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Industry

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Industry

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Barriers to Entry checklist Level

Competition High

Concentration Low

Life Cycle Stage Mature

Capital Intensity Medium

Technology Change Low

Regulation & Policy Light

Industry Assistance Low

Industry

Source: IBISWORLD14

• Tiffany’s business was founded in 1837 by Charles Lewis Tiffany.

• Charles Lewis Tiffany incorporated Tiffany in New York in 1868.

• The Registrant (Tiffany & Co) acquired Tiffany in 1984 and completed the initial public offering of the Registrant’s Common Stock in 1987.

Business - Overview

Source: http://www.tiffany.com/

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• The Company’s principal product category is jewelry, which represented 91%, 91% and 90% of the Registrant’s net sales in 2011, 2010 and 2009.

% of totalAmericas  Sales

% of total Asia-Pacific Sales

% of total JapanSales

% of total EuropeSales

% of total Reportable Segment Sales

2011

Statement, fine & solitaire jewelry a 16% 23% 12% 14% 16%Engagement jewelry & wedding bands b 23% 37% 41% 24% 29%Silver & gold jewelry c 33% 28% 16% 46% 30%Designer jewelry d 16% 11% 23% 12% 15%

2010

Statement, fine & solitaire jewelry a 15% 23% 13% 13% 16%Engagement jewelry & wedding bands b 21% 35% 42% 25% 28%Silver & gold jewelry c 36% 28% 17% 45% 32%Designer jewelry d 17% 12% 21% 13% 16%

2009

Statement, fine & solitaire jewelry a 14% 21% 11% 13% 14%Engagement jewelry & wedding bands b 21% 34% 43% 23% 27%Silver & gold jewelry c 38% 30% 19% 47% 34%Designer jewelry d 16% 12% 20% 14% 16%

Business – Product Segment

Source: 10-K 16

Business – Sales Area (in thousands) Americas Asia-Pacific Japan Europe Other Total

2005 1,410,803 185,023 485,686 138,768 92,512 2,312,792

2006 1,562,048 230,466 486,539 179,251 102,429 2,560,733

2007 1,759,868 353,280 500,479 243,579 70,545 2,927,751

2008 1,586,636 363,095 533,474 273,093 92,561 2,848,859

2009 1,410,845 426,296 512,989 306,321 53,253 2,709,704

2010 1,574,571 549,197 546,537 360,831 54,154 3,085,290

2011 1,805,783 748,214 616,505 421,141 51,294 3,642,937

Source: 10-K

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Business – Sales Area

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• The strategy to expand its worldwide store base, Tiffany & Co plans to add 24 Company-operated stores in 2012.

• Nine in the Americas, seven in Asia-Pacific, three in Europe and commence operations of five stores in Emerging Markets.

Business – Management Strategy

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• Retail Sales. Retail sales are transacted in Company-operated TIFFANY &

CO. stores• Internet Sales.The Company offers a selection of TIFFANY & CO.

merchandise for purchase through website.• Business-to-Business Sales.Products drawn from the retail product line and items

specially developed are sold to business customers.• Wholesale Distribution.Selected TIFFANY & CO. merchandise is sold to independent

distributors for resale.

Business – Business Models

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Retail Sales. Internet Sales. Business-to-Business Sales.

WholesaleDistribution  .

America X X X X

Asia-Pacific X X X

Japan X X X X

Europe X X X

Business – Business Models

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Business – Suppliers and Purchase

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Business – Manufacture

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• Conflict Diamonds. (Blood Diamonds)

Tiffany has informed its vendors that the Company does not intend to purchase Zimbabwean-produced diamonds.

• Manufactured DiamondsTiffany does not sell manufactured

diamonds.

Business – Rough Diamonds

Source: MovieposterDB.com24

• Tiffany has been the sole licensee for jewelry designed by Elsa Peretti and bearing her trademark since 1974.

• The designs of Ms. Peretti accounted for 10% of the Company’s net sales in 2011, 2010 and 2009.

• A written agreement exists between Ms. Peretti and Tiffany, but it may be terminated by either party following six months notice to the other party.

Business – Designer License

Source: http://www.tiffany.com/25

• Tiffany received from licensing agreements with Luxottica Group for the distribution of TIFFANY & CO. brand eyewear and with The Swatch Group Ltd. for TIFFANY & CO. brand watches.

Business - Licensing Agreements

04/20/23

• The earnings received from these licensing agreements represented less than 1% of consolidated worldwide net sales in 2011, 2010 and 2009.

Source: http://www.tiffany.com/

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• Driving Forces1.Increase the percentage of internally-

manufactured jewelry.2. increase the number of stores3.Diversify the business models4.Make licensing agreements to third parties.

Business

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Financial AnalysisAsset breakdown

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Financial Analysis

2007 2008 2009 2010 2011Short Term Liquidity Current Ratio 3.15 3.40 4.07 5.59 4.61 Quick Ratio 0.75 0.54 1.57 1.93 1.00 EBIT / Interest Exp. 23.45 12.62 7.09 10.08 13.69

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Financial Analysis2007 2008 2009 2010 2011

Asset TurnoverTotal Asset Turnover 1.59 0.92 0.78 0.88 0.88Account payable Turnover 6.27 5.38 5.09 4.88 4.53Accounts Receivable Turnover 15.09 17.32 17.07 16.59 19.79Inventory Turnover 1.03 0.75 0.83 0.92 0.72

2007 2008 2009 2010 2011Margin Analysis Gross Margin % 56.41% 57.79% 56.47% 59.06% 59.05% EBIT Margin % 20.06% 13.85% 16.26% 19.28% 19.45%

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Financial AnalysisDuPont Analysis

Tax Burdan Interest Burden Operating Profit Margin Asset Turnover Leverage ROE2007 0.64 0.99 0.20 1.00 1.78 22.60%2008 0.63 0.93 0.14 0.92 1.95 14.62%2009 0.68 0.89 0.16 0.78 1.85 14.11%2010 0.67 0.92 0.19 0.83 1.72 16.92%2011 0.66 0.94 0.19 0.88 1.77 18.70%31

Competitor

source: signet annual report, IBISWorld32

source: yahoofinance.com

CompetitorRelevant Stock Market

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Comparable Analysis

ValueP/E 67.98$ EV/EBITDA 75.07$ EV/Revenue 71.64$ P/BV 73.60$

Stock Ticker Stock Price P/E EV/Revenue EV/EBITDAProfit

MarginGross

MarginROE

Tiffany & Co. TIF 67.00 19.58 2.40 9.74 12% 59% 19%Signet Jewelers Limited SIG 47.65 12.77 0.96 7.62 9% 38% 14%

Coach, Inc. COH 72.57 22.92 4.57 13.51 21% 73% 55%Ralph Lauren Corporation RL 166.13 24.29 2.15 11.50 10% 59% 17%

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Although Tiffany & Co., is the outlier in this industry, she still might be impacted by the following: •Households earning over $100,000•Consumer sentiment index•Per capita disposable income•Marriage rate•World price of gold•External competition

Financial projection - Projection under risks

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Growth Projection- Base

Financial projection

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Discount rate for TIFFinancial projection

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Put it in our watch list unless the price goes below $45

Recommendation

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Thanks for listening!

Q & A

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