Tiffany Stock Up More Than 5% In Spite Of Soft Holiday Sales

Like many other retailers, Tiffany & Co. (NYSE:TIF) also posted soft sales for the two months ended Dec 31, 2018, or the popularly known holiday season. Results were significantly impacted by reduced sales to foreign tourists and lower demand from local customers in Europe and Americas. Also, the company slightly lowered its outlook for fiscal 2018 and issued an initial view for fiscal 2019.

Despite witnessing a decline in sales and comparable sales (comps), shares of this jewelry retailer gained 5.4% during the trading session on Jan 18. This aided Tiffany’s one-month price performance. Notably, shares of the company jumped 21%, better than the industry’s growth of 16.1%. Some industry experts believe that the bullish stance following the holiday sales results could be attributable to robust sales growth noted in mainland China and Japan, while the company’s global e-commerce sales were also favorable during the season.



Apart from Tiffany, retailers like Macy’s (NYSE:M) , Kohl’s (NYSE:KSS) and J. C. Penney Company (NYSE:JCP) posted unimpressive holiday sales numbers. Coming back to Tiffany, let’s delve deeper into the company’s sales numbers and outlook.

Tiffany’s Holiday Sales

The company’s worldwide net sales slipped 1% to $1.04 billion, whereas comps dipped 2%. On a constant currency (cc) basis, net sales and comps remained flat year over year. Region-wise, net sales fell 1% in the Americas to $514 million, whereas comps were in line with the year-ago quarter’s figure. Results in the region were hurt by reduced spending by local consumers as well as tourists.

Net sales dropped 3% to $226 million in Asia-Pacific, as strength in mainland China was more than offset by weakness across various other markets, mainly due to lower tourist sales. Comps in the region were down 4%. However, net sales jumped 4% to $150 million in Japan, with comps seeing equal growth. This was backed by increased spending by local consumers. Moving on, net sales in Europe were down 4% to $132 million and comps fell 5%. A modest fall in spending by both local and foreign tourist consumers dented results. Other net sales tumbled 11% to $14 million, owing to soft comps across five U.A.E. stores.

Category-wise, Jewelry Collections sales grew 2% during the holiday season, while sales of Engagement Jewelry and Designer Jewelry categories saw respective downsides of 3% and 8%. Tiffany operated 321 stores as of Dec 31, 2018, including 124 in Americas, 47 in Europe, 55 in Japan, five in the U.A.E and 90 in Asia-Pacific.

What’s in Store for Fiscal 2018 & 2019?

While Tiffany’s holiday sales lagged management’s expectations, the company remains committed toward its six key strategies that were unveiled last year. It expects to post record earnings and sales in fiscal 2018. The company is also hopeful about making further progress in fiscal 2019, wherein it plans to make additional product launches, enhance its marketing endeavors, and focus on store expansions and website improvements. However, fiscal 2019 (mainly first half) is likely to witness roadblocks stemming from tough year-over-year sales comparisons, external pressures and annualized internal expenditure.

That said, management envisions fiscal 2018 worldwide net sales growth of 6-7%, on a reported and cc basis. Earlier, management projected net sales to increase high-single-digit percentage on a reported and constant-exchange-rate basis. Comps are still expected to rise mid-single digits.

Management expects operating margin in fiscal 2018 to decline year over year, owing to a considerable rise in SG&A costs, likely to be somewhat cushioned by improved gross margin. Owing to these factors, Tiffany now expects fiscal 2018 earnings per share at the low end of its previously guided range of $4.65-$4.80.

For fiscal 2019, management provided its preliminary outlook and expects worldwide net sales to rise at a low-single-digit rate, on a reported and cc basis. Earnings are likely to rise at a mid-single-digit rate, with the first half expected to face sales-related challenges owing to soft tourist spending and anticipated currency headwinds. Also, increased expenses related to certain investments are anticipated to weigh on the company’s first-half performance.

Nonetheless, this Zacks Rank #3 (Hold) company is on track with its core growth plans and set to witness enhanced sales, earnings, margins and cash flows over the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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