Tiffany's sales top estimates, but holds off calling 'inflection'
Shares of Tiffany & Co. (TIF) climbed in morning trading after the company's third quarter results exceeded analysts' expectations, though the luxury jeweler said it needs to see more positive data before considering the quarter "an inflection point." EARNINGS: Tiffany reported Q3 earnings per share of 76c on revenue of $949M, beating analysts' estimates of 68c and $926.64M, respectively, with quarterly same-stores sales dropping 2%. Excluding foreign currency, Tiffany said worldwide net sales were flat with the prior year and SSS fell 3%. The company noted a "modest" increase in fashion jewelry sales in Q3, though this was offset by softness in other product categories. Additionally, the jeweler noted a "smaller sales decline" in the U.S. from a year ago. In the Americas, Tiffany's sales fell 2%, but total sales in Japan increased 13%. Looking ahead, Tiffany maintained its outlook for fiscal 2016, including a mid-single digit percentage decline in EPS from 2015 and worldwide net sales down in the low single digits vs. last year. WHAT'S NOTABLE: Tiffany said in its earnings release that there has been "some adverse effect" on traffic at its flagship store in New York following the U.S. presidential election and noted "sales softness" compared with a year ago and to the company's others U.S. stores. Tiffany noted that the New York store represented under 10% of worldwide net sales for the quarter, but said it "cannot provide any assurance that sales in that store will not be negatively affected by this activity in the fourth quarter or in any future period." Tiffany CEO Frederic Cumenal commented on its associated call that the company is "understandably cautious how this situation might impact sales" over the coming weeks. Cumenal added that while the company is "encouraged" by some early signs of improvement in overall sales trends, it is "premature" to say there has been a "meaningful" turn in the business. ANALYST COMMENTARY: Last week, Cowen analyst Oliver Chen said traffic at Tiffany's New York flagship store, which has an entrance next to Trump Tower's, could be cut in half. Wells Fargo analyst Ike Boruchow also noted that Trump's election "may cause an unforeseen headwind to the business" in Q4. At the same time, Jefferies analyst Randal Konik said last week that after spending three days monitoring Tiffany's 5th Avenue store, traffic "was robust, not weak," noting that "high" police activity did not inhibit entrance to the store. Following Tiffany's earnings report, Citi analyst Paul Lejuez said he is "concerned" about the company's ability to connect with the millennial customer in the U.S. and believes the strengthening of the dollar could be a headwind in Q4 and fiscal 2017. PEERS IN THE NEWS: Other publicly traded retailers of fine jewelry include Blue Nile (NILE) and Signet Jewelers (SIG). Earlier this month, Blue Nile announced plans to be acquired by private equity firm Bain capital and Bow Street for $500M. Separately, Blue Nile said U.S. engagement net sales for the quarter fell 8.5% to $59.5M, while U.S. non-engagement net sales increased 1.2% to $25.3M. Meanwhile, Signet Jewelers last week posted better-than-expected profit in its latest quarter, and gave an upbeat forecast for the current quarter. PRICE ACTION: Shares of Tiffany & Co. gained about 6% in morning trading to $83. Blue Nile and Signet are also higher this morning. TIF NILE SIG