This page has been archived and commenting is disabled.
Tiffany Tumbles After Missing EPS, Slashing Guidance; Blames Strong Dollar, "Volatile, Uncertain Conditions"
Once upon a time, luxury jewelry retailer Tiffany was seen as the bellwether for the global market, however not so much in the New Paranormal when as a result of the company over-reliance on China, and a new focus on aspirational middle-class consumers, the stock had recently been trading at levels not seen in over two years.
Things went from bad to worse this morning when the company reported its Q3 earnings when the company not only missed EPS expectations of a $0.75 print, reporting 70 cents in profit on $938.2 million in revenues, but slashed its FY EPS forecast from a 2-5% decline, and now sees a drop of 5-10% for the full year.
The company announced that "earnings declined 8% partly reflecting the negative effects from the strong U.S. dollar. Management is now projecting net earnings for the year ending January 31, 2016 to be 5%-10% below last year’s $4.20 per diluted share (excluding charges in both years), and is also now projecting free cash flow in excess of $500 million for the year."
Curiously it wasn't so much China's fault: "In the quarter, on a constant-exchange-rate basis the Company continued to experience healthy sales growth in China and Australia, while sales again declined in Hong Kong and Macau. Reported in U.S. dollars, total sales declined 2% to $238 million in the quarter while sales of $743 million in the year-to-date were unchanged from the prior year."
The culprit: the US.
In the Americas, on a constant-exchange-rate basis total sales and comparable store sales in the third quarter were 5% and 6% below the prior year, respectively, (compared with an 11% comparable store sales increase last year), and year-to-date total and comparable store sales declined 1% and 2%, respectively. The declines in both periods reflected sharply lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar, while sales to U.S. customers were roughly equal to the prior year. There was healthy comparable store sales growth in Canada and Latin America. Reported in U.S. dollars, total sales of $425 million in the third quarter and $1.3 billion in the year-to-date were below the prior year by 7% and 3%, respectively.
Here is the explanation for the latest disappointment:
Frederic Cumenal, chief executive officer, said, “As expected, the strong U.S. dollar continued to put pressure on our financial results, specifically from the translation of non-U.S. sales into dollars and on foreign tourist spending in the U.S. In addition, we believe that volatile, uncertain economic and market conditions in the U.S. and other regions are affecting consumer spending, causing us to maintain a cautious near-term outlook. However, focusing on what we can control, we’re pleased with our progress this year in expanding our store base and introducing and communicating compelling new product designs. And we are focused on efforts to manage our operations and inventories more efficiently to enhance cash flow. We are well prepared to delight our customers as they celebrate this holiday season, and our management team’s longer-term strategy continues to call for further strengthening Tiffany’s solid position among global luxury brands, which we believe will ultimately drive improved financial results.”
The impact :
In light of third quarter results, negative effects from the strong U.S. dollar and increased global uncertainties, management now expects net earnings in the year ending January 31, 2016 to be 5%-10% below last year’s $4.20 per diluted share (excluding the loan impairment charge in the second quarter of 2015 and a debt extinguishment charge in 2014). This forecast does not assume recording any additional loan impairment charges; continues to assume improving inventory productivity; assumes capital expenditures of $260 million; and projects free cash flow in excess of $500 million ($100 million higher than the previous forecast). All assumptions and expectations are approximate and may or may not prove valid.
And since the strong dollar isn't going away any time soon especially if the Fed does proceed with a rate hike in three weeks, expect even more weak "tourism spending", and more scapegoating of a strong dollar. The market agrees, and as of this moment the stock was dowen another 6% to just $72, the lowest since the summer of 2013.
»
- 343 reads
- Printer-friendly version
- Send to friend
- advertisements -
Sort of the CAT of the soft hands trades?
Turns out people with 29.5 hr/wk jobs and overpriced healthcare....can't afford bling.
Went to mall yesterday because I needed something from Radio Shack.....only to find it shuttered up.
Welcome to the recovery.
http://finance.yahoo.com/echarts?s=TIF+Interactive#{%22range%22:%22max%22,%22allowChartStacking%22:true}
Kind of an interesting 'lifetime' chart though.
Doesn't fit the "all is fabulous" FED CNBC speak now does it?
Warplanes falling from the sky is bullish for luxury retailers. Money is already worthless and soon your life is over anyway.
Might as well go out with a diamond studded bang!
Tiffany should be up on this news.
The strong dollar is keeping the tourists out of NYC......so they dont buy the bling to take back to their third world where it will get stolen
really ? stores have been jammed like never before. also there is a new Neiman Marcus opening in the Nouveau Rich Yuppie Playground of "Hudson Yards" (you know that "Neighborhood" they are building over the Train Yards on the West side of Manhattan)?? So maybe it is just regular local people of Manhattan doing the shopping -- most are already paying between $3,000 - $11,000 PER MONTH in rent
It was the weather stoopid.
I went shopping this weekend for some housewares in a large antique mall, I went too the same weekend last year. Last year it was jammed packed with Christmas shoppers trying to get a leg up on there list, this year the employees out numbered the shoppers.
I dont know where you are but here in the greater Boston area stores have been jammed like never before. Its impossible to find a parking space at many of the malls on weekends without either having to illegally park in handicapped or wait 20 minutes trying to snag a space if you see someone leaving. Also, many items are selling quickly.. The most frustrating thing is items being out of stock not geting 30%, 50% or whatever off.
Also when I was in NYC a few weeks ago stores were also packed around Tiffanys. Bergdoff goodman had a line of people at checkout.. of course I can't afford to shop there but it was intertesting seeing the crowdson 5th avenue like never before
BullShit!
I dont know where you are but here in the greater Boston area stores have been jammed like never before. Its impossible to find a parking space at many of the malls on weekends without either having to illegally park in handicapped or wait 20 minutes trying to snag a space if you see someone leaving. Also, many items are selling quickly.. The most frustrating thing is items being out of stock not geting 30%, 50% or whatever off.
Also when I was in NYC a few weeks ago stores were also packed around Tiffanys. Bergdoff goodman had a line of people at checkout.. of course I can't afford to shop there but it was intertesting seeing the crowdson 5th avenue like never before
How many were Asian, i.e. Chinese?
Online shopping vs going outside into the depths of shit.
Noticed CNBC had their guest talking up the consumer buying as the best Christmas ever. Couldn't believe it.
It's all perception to Wall Street, the Fed and the White House. Just talk it up and everything will be fine for their economic model.
Talk doesn't pay the huge increases in Obamacare and higher prices for rents, food and government transportation.
Vince makes a great point. I'm one of the lucky few who's premiums are only going up 10% this year. I say only because the last few were about 20%! Metra is asking for a 20% fare hike after passing one about 2 yrs ago. All those increases add up when your pay raise is 2%.
I'm laughing at the rest of Chicago as rahm just rammed through a massive property tax hike on all those poor Democrats. Have fun in your condo paying $1000 a month each for taxes and assessments! And to think that's just for police and fire pensions, what ya gonna do to fill that operating hole, or schools?????
None of the big vendor's does any work to attract the customers. Sorry, but there is no design left at Tiffany's or any of the other luxury jewelry reatalers. People are turning to Native American and other ethnic designs.