It’s arguably the most recognizable name in luxury goods. While jewelry retailers like Signet Jewelers (NYSE:SIG) have a bigger geographical footprint and Blue Nile has made online jewelry shopping a reality, Tiffany & Co. (NYSE:TIF) is still an iconic name that turns heads, making Tiffany stock attractive to many investors.
But the iconic name didn’t do much to help stave off the huge pullback of Tiffany stock during the last quarter of last year. Although most stocks lost quite a bit of ground between late September and late December, TIF stock was hit especially hard, falling 45% from peak to trough thanks to a huge surge in May that was more than fully unwound.
The past three months have noticeably cut into that pullback, though. Tiffany stock may soon rebound further.
Tiffany Stock Pushes Through the Rough Patch
For years, the chatter about Tiffany’s inevitable end has been getting louder. The advent of the internet has empowered consumers to find similar jewelry at better prices. And a lethargic global economy with unfavorable exchange rates has prevented tourists from visiting many of the company’s flagship stores.
Besides, the global society is evolving beyond petty things like self-indulgent spending on luxury jewelry. Glamour jewelry has become a tad gauche.
Except that none of those assumptions is actually true.
With the exception of a slight headwind in 2015 and 2016 (caused by an exceedingly strong U.S. dollar), Tiffany’s bottom line has actually proven rather resilient.
That’s impressive, particularly in the shadow of the retail apocalypse that has crimped other high-end brands like Tapestry (NYSE:TPR), which owns brands like Coach and Kate Spade. Tapestry, in fact, dialed back its full-year profit forecast in February, snapping the stock’s recovery effort.
That begs the question… why has Tiffany & Co. been able to do what it seemingly shouldn’t have been able to do?
Small Changes, Big Impact on Tiffany Stock
In retrospect, one can look back and see it wasn’t the diamond business itself that had fallen out of favor two years back. It was everything else. First and foremost, execution, operations and marketing got in the company’s way.
When Alessandro Bogliolo was named Tiffany’s CEO in the middle of 2017, he took the keys of a solid vehicle that was being driven the wrong way. Almost immediately, he was able to tweak the design-to-production-to-floor process and create fresh jewelry looks that draw crowds.
It wasn’t just new designs that made a difference for TIF and Tiffany stock, however. The company’s simple “Believe in Love” slogan sparked double-digit growth in engagement ring sales.
Tiffany’s sales and earnings turnaround coincided with Bogliolo’s arrival.
Bogliolo has done much behind the scenes, too, and continues to do so. Over the course of the past two years the company has hired more than a couple of thousand production workers, with the CEO explaining last month “We believe it’s a competitive advantage to cut and polish our own stones.”
Most of Tiffany’s rivals outsource their acquisition of stones and the manufacture of jewelry, not only ceding control and adding to costs, but often preventing shoppers from knowing exactly how and where gemstones were secured.
Such details matter in an increasingly self-aware world in which consumers are thinking twice about the kinds of societal impact their purchases are making.
Looking Ahead for Tiffany Stock
There’s one last potential pitfall for the rally of Tiffany stock that’s currently underway. The pivotal 200-day moving average of TIF stock lies immediately ahead, at $109.87. It’s the last of the key moving averages that could stand in the way of the rally.
Still, Tiffany stock has already made the statement that it’s got a fresh set of backers willing to stick with it. The rebound from its late-December low could have been nothing but a mere effort to fill in the gap the shares left behind in November.
But,even after filling in the gap last week, TIF stock has continued to move higher. Indeed, the stock’s continued to move higher on growing bullish volume that had previously been missing from the effort.
If the 200-day moving average line (the white line on the chart) is hurdled, the next potential stop is the gap around $122 that was made with a decided plunge in early October.
Tiffany stock isn’t cheap in any plausible meaning of the word. But that doesn’t actually matter at this point. The turnaround story, for the company and the stock, appears to be self-sustaining.
Just keep an eye on all the chart milestones.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
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