Breakout

Tiffany Beats! Economic Bears Are Running Out of Excuses

Jeff Macke
Breakout

Tiffany (TIF) bulls are getting a little blue box of love this morning. The luxury brand synonymous with Audrey Hepburn and price-oblivious tourists posted earnings of 70-cents per share on $895 million in revenues. Analysts had been expecting 52-cents on revenue of $855mm.

For the current quarter Tiffany said it expects to earn the same 77-cents after one-time charges compared to 79-cent analyst estimates. Guidance for the year remains the same.

The big surprise in the quarter was the strength in international markets generally and Japan in particular. On a pre-recorded conference call the company said, "without a doubt Japan sales growth in the quarter exceeded expectations more than any other region." Tiffany executives credited enthusiasm stemming from Japan's monetary policy changes for increasing momentum throughout the first quarter.

Oh yeah, Europe grew at 6% too. Yes, Europe.

"This has been a really hot stock this year," notes my Breakout co-host Matt Nesto. "So somebody saw this coming but not the sell-side analysts; this thing is still half hold-rated." For those new to the street, when an analyst says "hold" what he really means is "SELL!"

The bearish thesis for Tiffany has been that the company was being propped up by tourists, particularly in Japan. Europe was considered an unmitigated disaster and the U.S. was finally going to buckle. None of it happened. Instead the quarter got stronger as it went, particularly on the high end.

Tiffany as a particular stock isn't touchable here. It was a great quarter, but it's seldom a great idea to buy stocks that gap higher. Regardless there are plenty of data points worth noting:

  • 2013 continues to be brutal for bears betting on the collapse of consumer spending. It's just not happening. Shorting with the vague notion that consumer behaviors are finally going to give up the ghost and save continues to be a horrible plan.
  • Earnings for U.S. multinational companies are going lower due to relative strength of the U.S. dollar (!), but it's not hurting the stocks. That comes as no small surprise to those of the opinion that the rally over the last 4 years has been a function of dollar trashing by the Fed.
  • Japan has it going on economically speaking. Can a recovery based on nothing more than monetary stimulus having staying power? Maybe not, but betting against such a thing in the states has been murder.

Big-ticket items like cars, houses and bling are being sold at a growing clip. Consumer confidence is at a five-year high. That doesn't mean leading into the market face first here is a good idea, but those betting against the rising tide better grab snorkels.

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