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Breakfast at Tiffany's, Barbie's, and Sally's

Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Lately, I've been having morning javas and marmalade-smothered crumpets, while performing due diligence concerning three companies. This has led to fine morning connections with the always-dynamic Tiffany, Barbie, and Sally.

Tiffany & Co. (NYSE: TIF) is involved in product design, manufacturing and retailing activities. Their principal subsidiary is Tiffany and Co. - a jeweler and specialty retailer. Tiffany and Co.'s vast selection of jewelry was responsible for 91 percent of the subsidiary's net sales in fiscal 2011.

Over breakfast, Tiffany reported sales growth for the two-month period ended Dec. 31, 2012. Global Net Sales increased 4 percent to $992 million, while comparable store sales were unchanged from the prior year. Sipping my coffee, I mused to her that investors are much happier when comparable store sales show an increase. It's a sign of aggressive marketing and promotions despite a tough retail environment.

The Chairman and CEO of Tiffany, Michael J. Kowalski, said, "… due to uncertainty about general economic conditions in all our major markets, management is planning sales growth conservatively for 2013 and at this point expects net earnings growth of 6% - 9%."

Tiffany's management team has the resources to embark on expansion plans. Tiffany & Co. is planning sales growth, and they've got strategies in place for growth. They're not sitting back and riding rough economic waters, just hoping for a good outcome--they're making calculated forays into turbulent waters. This optimism and corporate confidence is something for investors to consider.

Consider the corporate mindset of companies. Being prudent and conservative is the new "exciting" since 2008.  Forecasts based on hype and hope, not on fundamentals, mean absolutely zilch. I have more trust in seasoned companies presenting conservative estimates based on researched realities than flamboyant forecasts of little substance.

Tiffany smiled and asked me if I've talked to Barbie lately. I told her I was heading over to Mattel (NASDAQ: MAT) to do just that.

Mattel is the international leader in the design, manufacture, and marketing of toys and family products. Their top-selling brands include Barbie, the most popular fashion doll ever introduced, as Barbie told me while she tore open a low-calorie sweetener and poured it into her cappuccino. Their Barbie line includes Barbie Dolls and Girls' Games, Videos, and Activities.

In October 2012, Mattel reported 2012 third quarter financial results. They reported Net Income of $365.9 million, or $1.04 per share. This compares to the prior year's third quarter net income of $300.8 million, or $0.86 per share. For the quarter, Net Sales were $2.08 billion, up 4 percent. On a regional basis, third quarter Gross Sales increased 6 percent in the North American region (U.S., Canada and American Girl). Operating income for the quarter was $487.4 million, compared to the prior year's operating income for the quarter of $397.6 million.

For the third quarter, global Gross Sales for Mattel Girls & Boys Brands were $1.37 billion - up 3 percent compared to the year prior. A tear rolled down Barbie's cheek as she said that worldwide gross sales for the Barbie brand were down 4 percent. Meanwhile, worldwide gross sales for Other Girls Brands were up 57 percent.  

While Barbie's still a major brand with huge overall market strength, investors may want to look into other product offerings the company has that can help them weather sales lulls in brands with rich histories. This would include the company's American Girl Brands - a wholly owned subsidiary of Mattel. American Girl has a broad array of books and age-appropriate and educational products.

My next appointment was to get to Sally's before lunch.  Sally Beauty Holdings (NYSE: SBH) is a global specialty retailer and distributor of professional beauty supplies. The company sells and distributes through 4,500 stores. In November 2012, they announced strong financial results for the fourth quarter and fiscal year ended Sept. 30, 2012. For the fiscal 2012 fourth quarter, consolidated net sales were $882.6 million. This represents an increase of 5.4 percent from the fiscal 2011 fourth quarter. Consolidated net sales for fiscal year 2012 were $3.5 billion, an increase of 7.8 percent from fiscal year 2011. It seems Tiffany and Barbie may have made a few trips to their specialty stores.

For the fiscal fourth quarter of 2012, GAAP net earnings grew 20.7 percent to $65.6 million, or $0.35 per diluted earnings per share, over net earnings of $54.4 million, or $0.29 per diluted earnings per share in Q4 2011. For fiscal year 2012, GAAP net earnings grew 9.0 percent to $233.1 million, or $1.24 per diluted earnings per share, over GAAP net earnings of $213.7 million, or $1.14 per diluted earnings per share in 2011. For fiscal year 2012, adjusted net earnings grew 33.4 percent to $267.2 million, or $1.42 per diluted earnings per share.

Investors should note that the fiscal 2012 fourth quarter and overall fiscal 2012 sales increased due to same stores sales growth, the addition of new stores, and acquisitions. Growth in same store sales is especially notable--it speaks of the company finding new ways to squeeze extra sales from existing operations. Investors should consider retailers who grow same store sales via aggressive marketing and promotions, competitive pricing, and the right product mix within those stores.

It may be time to stop my little morning rendezvous' - however harmless – with Tiffany, Barbie, and Sally. My wife's getting suspicious. However, she said if the potential for robust returns is strong, she might turn her head a while longer, if these three continue to show promise in funneling potential returns to investors.


MichaelONTARIO has no position in any stocks mentioned. The Motley Fool recommends Mattel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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