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Tiffany & Co. (NYSE:TIF) specializes in fine jewelry, but the company also puts its name on timepieces, silverware, china, stationery, and other luxury items. Many products are packaged in the company's trademarked Tiffany Blue Box. To entice budget-minded Buffys to do more than window shop, Tiffany has broadened its merchandise mix to include key chains and other items that sell for much less than the typical Tiffany price tag. The firm sells its goods exclusively through nearly 170 Tiffany & Co. stores and boutiques worldwide, its Web site, business-to-business accounts, and catalogs.

While Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) worry about the price of gas and how it has hurt their customers, some of Tiffany's clients are pulling up in their chauffeur driven limos and buying more than ever, especially overseas. That's part of Tiffany's competitive advantage. It's been expanding in Asia and following economic strength around the world, opening new stores as the demographics warrant.

Tiffany management has also been smart about its product line, knowing that young affluent buyers are just as important as the older gentry. By featuring new designs and price points, the company is attracting a newer, younger client base. There's a recent collection by designer Frank Gehry that's selling well. A new campaign for silver and gold charms is adding to revenues. You may have seen the ads: Charmed by Tiffany. They're working.

Profits are increasing with the streamlining of the product line, new additions, and higher margins. In 2004, earnings per share were $1.42, then $1.75 in 2005. Last year, eps were $1.80. Look for $2.10 this year and $2.40 next year. Over the next 5 years, analysts expect earnings to average 14% growth per year while revenues gain by 10.5% a year, on average.

All this good news hasn't been lost on the stock. It's recent all-time high of $56.80 almost doubled the price from the low of last year. The price is now about 20% below its high. With a relatively loft p/e of 23, the stock seems fully priced at these levels. That doesn't mean investors should ignore it. Rather they may want to put it on a watch list in case it breaks further, giving them an opportunity to buy at an attractive price.

Some other numbers that bolster investors' enthusiasm: Net profit margin is 9.6% with anticipation of reaching 11.5% in the next 5 years. Return on Equity is 14%. Debt to Equity is .25. Current assets overwhelm current liabilities by more than 4 to 1 with inventory the majority of the assets. There is a small dividend of 60 cents a share annually. That was just increased on August 16, taking it from 12 cents a share to 15 cents a share, the second increase this year. It's been going up every year for the last 4 years, starting with 19 cents a share in ! 2003.

Tiffany is in great financial shape. Sales are increasing with earnings growing even faster (always a good sign). Management is very aware of the cache the label carries which it's been able to turn into cash. It doesn't dilute the brand with too many products but does add items that appeal to more, younger, affluent buyers. Everything's clicking for Tiffany's. Investors have already rewarded the stock for that. Now if it takes a breather, it might be a retailer worth more of your time. Maybe even your investment.

TIF 1-yr chart

TIF

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Source: Tiffany & Co.: Profits Wrapped in a Blue Box