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Tiffany Stock Tumbles After Revenue And Profit Drops, EPS Slide 16%; Forecast Cut; Strong Dollar Blamed

Tyler Durden's picture




 

Even the rich are starting to feel the pinch, at least according to the favorite jeweler of the upwardly mobile middle-to-upper class (especially in China and Japan), Tiffany & Co., which earlier today reported Q2 EPS of $0.86, below the $0.91 expected, with GAAP EPS of $0.81 some 16% below the $0.96 record last year.

Like other retailers, TIF was quick to blame the surging dollar (which isn't going anywhere if the Fed indeed proceeds with a rate hike), blaming it for lowering the value of the Tiffany’s sales overseas, where the company gets most of its revenue. Currency fluctuations also have kept tourists from making purchases at U.S. stores, dealing a second blow to revenue.

Per the release, "higher sales to U.S. customers contrasted with lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar."

However, the slowdown in USD-purchases were offset by tourists purchasing TIF wares in Europe: "higher sales to U.S. customers contrasted with lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar, and there was healthy comparable store sales growth in Canada and Latin America."

In other words, Tiffany is rapidly becoming a global FX arb, with tourists from countries with overvalued currencies purchasing TIF jewelery in countries with devalued FX rates. Still, we are confident Tiffany's speaks for everyone when, as its newly appointed (on April 1) CEO Fred Cumenal said, "The adverse effects from the strong dollar have been even more significant than initially expected."

Topline weakness was met with increased labor and wage spending: SG&A expenses rose 9% in the second quarter and 7% in the first half, due to higher marketing expenses and increased costs related to store occupancy and depreciation, as well as increased labor expenses. Don't expect Tiffany to be hiking wages any time soon.

Whether as a result of the global FX turmoil, or simply because suddenly the rich don't feel so very rich following the inability of the global stock market to hit new highs in Q2, the company cut guidance, and now expects its fiscal 2016 earnings to be 2 percent to 5 percent below last year’s total of $4.20 a share. Analysts estimated $4.23 on average. TIF may have been overly optimistic: in its   guidance it explicitly states that its expects the resumption of growth in Q4.

From the report:

For the year ending January 31, 2016, Management now expects net earnings to be 2%-5% below last year’s $4.20 per diluted share. This forecast assumes no growth in net earnings in the third quarter and a resumption of growth in the fourth quarter. Also for the full year, this forecast does not assume recording any further similar loan impairment charges; this forecast does continue to assume inventories increasing at a rate below sales growth; capital expenditures of $260 million; and free cash flow in excess of $400 million. All assumptions are approximate and may or may not prove valid.

The may indeed, good luck. For now, however the stock is not too happy and was down 7% in the premarket trade, having already slumped 20% through Wednesday. Perhaps this is the culprit: the Company repurchased only $23 million shares in the second quarter.  However, considering the average cost of repurchases was $90 per share, maybe the company will be less enthused about generating -12% returns...

 

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Thu, 08/27/2015 - 08:05 | 6476757 Haus-Targaryen
Haus-Targaryen's picture

Premium goods are not as dependent on a weak currency as goods that are price dependent.

Economy is slowing down, and someone in A&F doesn't have the balls to say so.   

Thu, 08/27/2015 - 08:09 | 6476763 VinceFostersGhost
VinceFostersGhost's picture

 

 

Purchases of 5 carat diamond rings are down in the 93 million jobless sector....go figure.

Thu, 08/27/2015 - 08:19 | 6476798 Stackers
Stackers's picture

They're all a bunch of dirty rats

Thu, 08/27/2015 - 08:39 | 6476837 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

Billionaires losing billions. Life can be tough!

Thu, 08/27/2015 - 10:17 | 6477253 Triggernometry
Triggernometry's picture

I spent two years ('12-'14) at Tiffany's managing development of new fine jewelry & engagement products in the New Product Engineering group.  This news does not surprise me one bit, as their manufacturing is quite the shit show- turbulent workflow, poor organization, horrible facility utilization, an archaicly redundant barcode scanning system used to track work orders which should have been replaced with RFID a decade ago (as I vociferously fought for to no avail), and, perhaps most egregiously, A NEAR TOTAL LACK OF PROCESS & QUALITY CONTROLS.  The organization is structured to give too much power to FIT jewelry grads without any concept of lean manufacturing or product development simply because they're blindly labeled "product development"; this inevitably results in seasonal marketing driven dynamics utterly divorced from the realities of even basic product development methodologies, often pitting petulant rookie "analysts' with too little knowledge and patience against seasoned craft professionals with too few resources and time to accomodate superfluous design changes through late stages of development despite fixed deadlines.

I did, however, have a rather posh office on 5th ave, met truly gifted jewellers, and got employess discounts so ridiculous I can't stomach the thought of paying retail for that junk ever again.

Thu, 08/27/2015 - 08:13 | 6476774 XAU XAG
XAU XAG's picture

Some thing wrong if Tiffany's ....................drop revenue and profit

Thu, 08/27/2015 - 08:15 | 6476772 Handful of Dust
Handful of Dust's picture

I've read those luxury stores in NYC are having a rough time selling those $4,000 Tumi bags nowadays. The salesman said the ONLY people who buys them are Chinese and they are slowing down.

 

Can't imagine why?

Thu, 08/27/2015 - 08:44 | 6476846 ghengis86
ghengis86's picture

I do appreciate and sometimes enjoy the finer things in life, but who the fuck pays $4k for a fucking handbag?? Some overly pretentious, narcissistic, vapid piece of shit. I have a hard time dropping $150 on a bottle of whiskey for special occasions.

Give me a plastic target bag filled with 250 ounces of silver and keep your fucking Tumi bag.

Thu, 08/27/2015 - 08:15 | 6476783 blown income
blown income's picture

Oh the humanity /S

Thu, 08/27/2015 - 08:18 | 6476792 Seasmoke
Seasmoke's picture

Can You wrap a Flamethrower in one of those pretty blue boxes.

Thu, 08/27/2015 - 08:22 | 6476801 Mayer Amschel R...
Mayer Amschel Rothschild's picture

Luxury items are usually last to fall before the end of a major ecoonomic cycle.  The usual solution of raising prices to entice more sales from the fabulously rich & glamorous isn't working either.

Thu, 08/27/2015 - 08:26 | 6476812 stantheman
stantheman's picture

I come to Zerohedge to get my daily dose of depression.

Thu, 08/27/2015 - 08:37 | 6476835 Arnold
Arnold's picture

http://www.oldielyrics.com/lyrics/the_chi-lites/have_you_seen_her.html

 

Glad to be of assistance.

Will there be anything else?

Thu, 08/27/2015 - 08:29 | 6476820 Elio
Elio's picture

This strong dollar thing is a huge lie. Thats been just another one of those never ending excuses to not to raise rates. So called strong dollar couldnt even manage to become 1 dollar 1 euro thing. it only looks strong against Ruble ,Real and Lira give me a break.

Thu, 08/27/2015 - 09:06 | 6476942 VW Nerd
VW Nerd's picture

With the domestic Federal deficit allegedly declining, foriegn selling of treasuries and growing bilateral trade outside the dollar around the world reducing transaction clearing through NY banks, I have been wondering if the boutiques and $500 per plate reataurants around Wall Street are feeling a pinch.  Just wondering....

Thu, 08/27/2015 - 10:36 | 6477337 dsty
dsty's picture

such little gratitude amongst the working class!

Thu, 08/27/2015 - 10:48 | 6477390 pitterrier
pitterrier's picture

I walked through a hgh-end mall store women's shoe department a few weeks ago and saw plenty of women's shoes selling for over $1000 a pair.  I saw a pair of sneakers for $1200 or 85 oz of silver.  What kind of moron would exchange 85 oz of silver for a pair of high fashion sneakers?

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