Sandwich at Tiffany's

12 March 2007 By David Vise

Hard to say the raiderturnedcorporate doctor is more experienced in fastfood and condiments than luxury jewels. But he may be on to something. Tiffany’s margins lag other luxury goods retailers and its real estate provides a value cushion.

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Nelson Peltz revealed in late February that his Trian investment company had purchased a 5.5% stake in Tiffany, the upscale jeweler. Peltz bought the stock at prices ranging from $38.53 to $42.77, beginning in midJanuary. He disclosed the stake on February 26. In an SEC filing, Peltz said he wants to help Tiffany improve its margins and earningspershare growth, address various operational issues, and review noncore holdings.

Tiffany owns premier real estate that houses its stores in London, Manhattan and Tokyo. In London, Tiffany spent $73m beginning in 2002 for 33,000 square feet of retail. In New York, Tiffany spent $100m in 1999 to buy its flagship store on Fifth Avenue and 57 th Street, and then spent another $110m on improvements. The building has 40,000 square feet of retail space, with the remaining 84,000 square feet used for backoffice and other operations.

In Tokyo, Tiffany spent $140m to buy a 60,000 square foot building in 2003. It uses 12,000 square feet for retail and leases the other space to outside tenants.

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