The year ahead does not look good for Tiffany & Co. (NYSE:TIF). Most of Tiffany’s sales come from outside the United States, specifically Europe, and the debt crisis in Europe is negatively affecting sales of their expensive jewelry.

David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore recommends holding the shares. “It’s better to be a little more conservative for those other parts of the world. You are seeing more volatility in the financial markets. It’s not confidence-inspiring for bigger-ticket spending. That tells you not to expect too much in the top line for Tiffany.” According to Schick, Tiffany’s profits rather than their revenue will be affected by the slow sales growth. Tiffany’s operating margin in the Asia-Pacific region was 28% and 21% in Europe in the most recent quarter.

Dorothy Lakner, a New York-based analyst with Caris & Co., predicts a 12% sales gain in 2011 and is calling for less than half that in 2012. “There has been a reset of expectations,” said Lakner, who recommends buying the shares “given the strength of the brand.”

Lakner dropped her Tiffany stock target price to $90 from $102 on Nov. 30. On the same day, Goldman Sachs Group Inc.’s Adrianne Shapira dropped hers to $70 from $72. Tiffany closed on Dec. 30 at $66.26. “For now, obviously, the question is, ‘Does the softness continue?’” Lakner said. “Does it continue for a quarter? For several quarters?”

To contact the reporter on this story: Laurie Danas at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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