When comparing the financial statements and annual reports of Tiffany and Co. versus Movado Group, the annual reports show that Movado Group is performing better although the ratios for Tiffany and Co. illustrate it having higher sales.
Looking at the inventory turnover for the two companies, Movado has a much higher rate of up to 1.96 in 2018 compared to the steady rate of Tiffany of an average of 0.7 from 2016 to 2018. Lower inventory turnover generally means that a company has stocked too much inventory compared to its sales. This is crucial because Tiffany has a very high inventory in comparison with Movado. Despite Movado’s growth, it is evident that Movado’s current ratio is dropping drastically over the last three years. If the current ratio is low, there is a higher risk in the future as liquidity is low. This exemplifies that there may be a higher risk in the future for Movado, as lower current assets means lower short term investments and cash on hand for salaries. The current ratio is decreasing over time for Tiffany, however it is steadily dropping from 5.65 in 2016 to 5.24 in 2018. On the other end, the current ratio for Movado is decreasing at a higher rate starting from 7.07 in 2016, dropping to 4.15 in 2018. Here, Movado’s high current ratio indicates that they are able to meet its short-term obligations.
The debt to asset ratio is increasing for Movado Group from 0.22 in 2016 to 0.34 in 2018. Tiffany, however, keeps its debt to asset ratio steady at 0.41 in these three years. The debt to asset ratio displays the percentage of total financing that is being done. This ratio provides some indication of the company’s ability to withstand losses without impairing the interests of its creditors. The higher the percentage of debt to assets, the greater the risk that the company may be unable to meet its maturing obligations. Thus, from the creditors’ point of view, a low ratio of debt to assets is desirable.
Looking at Tiffany & Co.’s MD&A, we can see that the worldwide net sale increased 7% to $4.4 billion, as there are sales growth in all reportable segments, in comparison with the 4% growth from the prior year. Tiffany is extremely confident in its performance in 2018. On the other hand, in the MD&A section for Movado, the explanation of the lack of growth in the net sales for the year 2018 presented fluctuating foreign currency exchange rates that favorably impacted net sales by $3.0 million when compared to the prior year.
Tiffany disclosed in their 2018 Annual Report that corporate social responsibility, including environmental sustainability, is a core element of their brand. They also launched a new Diamond Source Initiative whereby customers can know the geographical countries or region of origin of their individually registered diamonds, which differentiates Tiffany in the luxury jewelry market. In Tiffany’s letter to shareholders, they specifically emphasized on the importance of their progressed diversity inclusion for their employees. On the other hand, Movado Group also emphasized in their reports that they seek to have directors who represent a diverse mix of backgrounds and experiences to enhance the quality of their Board of Directors’ decisions.
In conclusion, the analysis of the ratios calculated with Tiffany & Co. and Movado Group indicate that Movado Group is performing at a higher potential. Although Tiffany and Co. is steady with high sales, Movado is improving more in terms of their rate of growth for their investors.
Comments