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Tiffany sparkles

A world-class brand name can help luxury retailers turn in superior performance, even when economic worries and high gasoline prices are making business sluggish at less-exclusive stores.

So you might expect that Tiffany stock would have outpaced the overall retailing sector over the past couple of years. After all, only a couple of dozen luxury goods makers worldwide have equally famous names.

In fact, though, Tiffany has greatly underperformed retailers like Target that appeal to a broader market. The reason: Tiffany gets 38 percent of its sales overseas, more than half of which comes from Japan. And the company's business in Japan has been slipping for nearly two years.

In the most recent quarter, however, sales were up slightly in Japan, a change of direction indicating that a turnaround is under way. The rest of Tiffany's quarterly numbers were solid, too.


None of these developments has gone unnoticed. After hitting an all-time high above $48 a share in November 2003, Tiffany stock sank to less than $30 late last year. But in the past four months, the stock has rebounded.

At a current $36.80, Tiffany has retraced 40 percent of its former decline. In light of current business trends, the company has slightly raised its guidance for the current fiscal year, ending Jan. 31, to around $1.60 a share.

Analyst project a double-digit gain to about $1.78 for the following fiscal year and see long-term growth at a compound annual rate of 12 percent. The stock also yields almost 1 percent.

Based on those projections, Tiffany stock doesn't look especially cheap, trading at 20.6 times earnings for the coming year. Historically, however, the stock has often carried a premium, because of its glamorous brand name and above-average growth prospects.

Those analysts who believe that the company is finally succeeding in turning its Japanese operations around project that the shares could surpass their previous highs within the next 12 months, a 30 percent gain from current levels.
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