Tiffany & Co. TIF shares were up 0.9% to 131.07 at Tuesday's market close. The shares zigzagged through the day following solid earnings results, as investors expressed concerns about the company's valuation and spending plans.
The 180-year-old, New York-based iconic jeweler posted a net sales increase of 12% globally, $1.1 billion in revenue. The company also reported same-store sales increase of 8% in its second quarter. Earnings per share advanced 27%, year to year, to $1.17, according to the company release before market open.
Even though the company's customization initiatives appear to be paying off, its current valuation is seen as too expensive.
"The stock seem to trade at a fairly high valuation most of the time, but at this point in a bull market cycle, it feels a bit much to me," wrote Real Money contributor David Butler in his take.
Then there are the company's debt obligations.
"They've done a good job at diminishing current or short term liabilities, but the company does have a considerable amount of debt at $881.4 million," Butler noted. "When you couple that with increasing obligations pertaining to pensions and benefits, total stockholder's equity is declining."
The shareholders' equity portion of total debt outstanding decreased to 32% from 35% a year ago.
Others were also concerned about the increasing pace of spending.
Tifffany's SG&A expenses jumped 20% in the second quarter.
Still, the company is counting that its investments in inventories, marketing and personalization strategies will pay off in the long term.
"We had increased our spending in various aspects of our business, which we expect to continue for the rest of the year and which we believe is necessary to generate sustainable sales and earnings growth in the future," CEO Alessandro Bogliolo on the earnings call today. "Spending for the remainder of the year is planned to be well above prior-year levels."
The company is investing in technology, marketing, visual merchandising, digital and store revamp, jewelry inventories as well as the renovation of its flagship Manhattan store.
Analysts and investors will take note of further price action this year, as debate is still open on whether the stock's run so far this year makes it a buying opportunity.