Declining cash flows
The cash flow from Tiffany’s operations declined in fiscal 2007 to $233.6 million, a decline of 11.1%
in comparison to $262.7 million in fiscal 2006.The free cash flows declined by 51.6% to $51.2 million
in fiscal 2007 compared to $105.7 million in fiscal 2006.The cash and cash equivalents also declined
by 55.2% in fiscal 2007 to $176.5 million from $393.6 million in fiscal 2006.
Such decline in cash flows would strain the company’s financial positions. This in turn will limit the
company’s investment options and dividend payment capabilities. This could impact the company’s
performance on the stock exchange.
Sluggish performance in the Japanese market
After showing signs of improvement in early 2006, Japanese consumer confidence fell to 1.8 points
in June 2006 from a high of 6.1 points in March 2006. Rising wages and falling unemployment made
consumers in March purchase more than they ever had in the past decade. However, core consumer
prices, which exclude fresh food, increased by 0.6% in May 2006 from the previous year, the fastest
pace in eight years. This has discouraged consumer spending, resulting in 0.7% decline in retail
sales in Japan, in April 2007. The Japan Chain Stores Association reported that 2006 was the tenth
consecutive year of annual sales decreases, with a 2.7% decline in sales on a same-store basis.
Moreover, according to IMF’s ‘World Economic Outlook, April 2007‘, it is projected that the real GDP
for Japan would decline from 2.3 in fiscal 2007 to 1.9 in fiscal 2008.
Low consumer confidence has impacted the company’s operations in Japan. Revenues from the
Japanese market increased 0.1% in fiscal 2007, to touch $491.3 million. The contribution from this
market declined from 22.3% in fiscal 2005 to 18.6% in fiscal 2007. Tiffany also closed seven stores
in Japan between the periods 2006-2007. A continued underperformance in Japan would further
affect Tiffany’s revenue growth.
Declining cash flows
The cash flow from Tiffany’s operations declined in fiscal 2007 to $233.6 million, a decline of 11.1%
in comparison to $262.7 million in fiscal 2006.The free cash flows declined by 51.6% to $51.2 million
in fiscal 2007 compared to $105.7 million in fiscal 2006.The cash and cash equivalents also declined
by 55.2% in fiscal 2007 to $176.5 million from $393.6 million in fiscal 2006.
Such decline in cash flows would strain the company’s financial positions. This in turn will limit the
company’s investment options and dividend payment capabilities. This could impact the company’s
performance on the stock exchange.
Sluggish performance in the Japanese market
After showing signs of improvement in early 2006, Japanese consumer confidence fell to 1.8 points
in June 2006 from a high of 6.1 points in March 2006. Rising wages and falling unemployment made
consumers in March purchase more than they ever had in the past decade. However, core consumer
prices, which exclude fresh food, increased by 0.6% in May 2006 from the previous year, the fastest
pace in eight years. This has discouraged consumer spending, resulting in 0.7% decline in retail
sales in Japan, in April 2007. The Japan Chain Stores Association reported that 2006 was the tenth
consecutive year of annual sales decreases, with a 2.7% decline in sales on a same-store basis.
Moreover, according to IMF’s ‘World Economic Outlook, April 2007‘, it is projected that the real GDP
for Japan would decline from 2.3 in fiscal 2007 to 1.9 in fiscal 2008.
Low consumer confidence has impacted the company’s operations in Japan. Revenues from the
Japanese market increased 0.1% in fiscal 2007, to touch $491.3 million. The contribution from this
market declined from 22.3% in fiscal 2005 to 18.6% in fiscal 2007. Tiffany also closed seven stores
in Japan between the periods 2006-2007. A continued underperformance in Japan would further
affect Tiffany’s revenue growth.
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