Rough Diamond: Analysts React To Tiffany's Mixed Q3 Print

Tiffany & Co. TIF shares fell roughly 12 percent Wednesday to their lowest level in roughly eight months. This dip follows the luxury retailer's report of in-line third-quarter EPS and a sales miss.

The Analysts

• KeyBanc Capital Markets analyst Edward Yruma reiterated an Overweight rating on Tiffany and lowered the price target from $150 to $125.
• Bank of America Merrill Lynch analyst Lorraine Hutchinson reiterated a Neutral rating and lowered the price target from $120 to $105.
• Citi analyst Paul Lejuez reiterated a Buy rating without a specified price target.

Tourist Business 

Following the push in new marketing strategies, fresh products and better store presentations, some regions have demonstrated an uptake in local customer demand, BofA's Hutchinson said in a note. 

“We estimate that the Chinese consumer accounts for 25 percent of TIF’s total sales. Within that, a third is generated in mainland China, where sales accelerated from [the first half of 2018] to a double-digit growth rate in Q3. Chinese tourists shopping abroad generate the remainder and had a negative impact on Q3 comps in the Americas, Europe and Japan.”

Pressures such as currency, stock market weakness and government initiatives will likely prevent an increase in tourist consumption, Hutchinson said.

Product Lineup

Improved marketing and product innovation have also aided the company’s growth, said KeyBanc's Yruma.

“The launch of Paper Flowers globally has been in-line with management’s expectations, and product performance trends have stayed consistent, with improving conversion levels and increasing in-store and online traffic. TIF will continue to innovate its product offering, both through new collections and by innovating within existing jewelry collections."

E-commerce sales have improved, while updated merchandising tactics have bolstered the overall customer experience, according to company data, Yruma said. 

Stock Movement

The company’s disappointing comp growth reveals a buying opportunity before the holiday season, Tigress Financial’s Ivan Feinseth said in his newsletter.

“Tiffany traded almost 1-percent lower yesterday after reporting Q3 earnings in-line, but [with] revenue and comp growth missing consensus. The company also noted slightly higher SG&A and lower spending by foreign tourists, primarily Chinese, impacted some regions. Tiffany also announced it will increase strategic spending to drive holiday traffic.”

Price Action

Tiffany shares were down more than 1 percent at $91.55 at the time of publication Thursday. 

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