Tiffany & Company is a luxury jeweler and specialty retailer that sells timepieces, sterling silverware, china, crystal, fragrances, and accessories through its retail stores worldwide. Signet Jewelers Ltd. operates a number of well-known retail stores (Belden Jewelers and Kay Jewelers, among them) that sell moderately priced jewelry and other items. Selected financial information about each company for the year ended January 31, 2018, follows:

Required:

1. The profit margin at Tiffany & Co. is higher than that at Signet Jewelers. What is it about each company’s strategy and positioning that might explain the profit margin difference? You may want to visit each company’s website before answering this question.

2. The asset turnover at Signet Jewelers is higher than that at Tiffany & Company. What is it about each company’s strategy and positioning that might explain the asset turnover difference?

3. Suppose Tiffany management found a way to increase sales to the point where the company’s asset turnover ratio exactly equaled that of Signet Jewelers, while maintaining its 9.6% profit margin. Calculate the dollar amount of sales and net income that would result.

4. At its existing asset turnover rate, how high must the profit margin at Tiffany be for the company to earn an ROA equal to Signet’s 9.0%?

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($ in millions) Tiffany & Co. Signet Jewelers $6,253.0 $519.3 9.0% Sales $4,169.8 $370.1 Net income Return on assets (ROA) Profit margin 7.6% 9.6% 8.9% Asset turnover 0.79 1.01