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Tiffany & Co. Records Disappointing 3rd-Quarter Results

Tiffany & Co. (NYSE:TIF) released its third-quarter earnings before the opening bell on Dec. 5. Earnings and revenue did not meet analysts' projections due to low foreign tourist spending in the U.S. and business disturbance in Hong Kong, its fourth-largest market, due to ongoing protests.

By the numbers

The New York-based luxury jeweler posted earnings of 65 cents per share for the third quarter, falling short of estimates of 85 cents. Revenue of $1.01 billion fell short of analysts' expectations of $1.04 billion.


Worldwide comparable store sales, barring the impact of currency exchange rates, grew 1%, which was less than the 1.44% growth analysts were anticipating. Excluding the Hong Kong market, worldwide comps grew 3%.

Reflecting on the company's performance, CEO Alessandro Bogliolo said:


"Our underlying business remains healthy with sales attributed to local customers on a global basis growing in the third quarter, led by strong double-digit growth in the Chinese Mainland offset in part by softness in domestic sales in the Americas. We are continuing to amplify the Brand with the recent colorful extension of Tiffany T, the launch of the men's collection, the unveiling of the Tiffany & Love fragrance pillars and our 'Very, Very Tiffany Holiday' campaign."



Segment performance

In North America, sales retreated 4% in the third quarter to $423 million, while comps declined 4%. The company attributed the decrease to lower spending by foreign tourists and local customers.

In the Asia-Pacific region, sales remained flat at $294 million. Comps decreased 2% on a year-over-year basis. While the company performed well in China, growth was soft in Hong Kong due to protests regarding a new extradition law.

Total net sales in Japan amounted to $169 million in the third quarter, which reflected a 19% gain from the year-ago quarter. Comps climbed 19%.

In Europe, net sales dipped 4% to $111 million, while comps were unchanged.

Efforts

Currently, the company is renovating and modernizing its New York flagship store on Manhattan's Fifth Avenue, which generates 10% of the company's annual sales. The project is slated to be completed in the fourth quarter of 2021. Each year, the company projects it will spend 1% to 2% of global net sales on the project.

LVMH's acquisition of Tiffany

Last week, French luxury group LVHM (XPAR:MC) announced it will acquire Tiffany in a deal valued at $16.2 billion. In addition to expanding the fashion giant's jewelry portfolio, the deal will expand its reach among U.S. consumers.

"Acquiring Tiffany provides LVMH not only the entry into the fine jewelry segment but also the more accessible segment, which is growing at a faster pace than fine jewelry," an analyst said.

Tiffany will also benefit from the combination with LVMH. Chairman Roger N. Farah said the deal will give the company "an exciting path forward with a group that appreciates and will invest in Tiffany's unique assets and strong human capital."

Store update

Tiffany has launched five company-operated stores year to date and shut down three locations. It currently operates a total of 323 stores.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.