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Tiffany &Co. Case Analysis

In July l993 .Tiffany& Company concluded an agreement with its Japanese distributor, Mitsukoshi Ltd. that would fundamentally change its business in Japan. Under the new agreement, Tiffany’s wholly owned subsidiary, Tiffany& Company Japan Inc. (Tiffany-Japan), assumed management responsibilities in the operation of 29 Tiffany &Company boutiques previously operated by Mitsukoshi in its stores and other locations in Japan. Tiffany looked forward to the new arrangement, as it was now responsible for millions of dollars in inventory that it previously sold wholesale to Mitsukoshi, resulting in enhanced revenues in Japan derived from higher retail prices. It was also apparent, however, that fluctuations in the yen/dollar exchange rate would now affect the dollar value of its Japanese sales, which would be realized in yen. Since Japanese sales were large and still growing, it seemed evident such fluctuations substantial impact on Tiffany's future financial performance.
Company Background
Founded in New York in 1837,Tiffany &Company was an internationally renowned-retailer, designer, manufacturer ,and distributor of luxury goods .The famous blue-box company found its initial success in fine jewelry, most notably diamonds, but had since expanded its product line to include timepieces, china, crystal, silverware, and other luxury accessories. In the fiscal year ending January 31, l993 (FY1992), Tiffany earned $15.7million on revenues of $486.4million and had total assets of$419.4 million. Recent financial statements are provided in Exhibits 1and 2.An historical summary of operations is provided in Exhibit 3.
After more than a century of independence, Tiffany was acquired by Avon Products, Inc. in 1979.For the next several years, Avon, a nationwide door-to-door cosmetics marketer, worked to expand Tiffany's product line to reach beyond its traditional affluent customer base to the larger middle market. While this diversification strategy resulted in enhanced sales...