Tiffany’s Sales Miss and Weak Outlook Weigh on Stock



Key takeaways

Tiffany’s (TIF) posted weaker-than-expected fiscal 2018 fourth-quarter[1.ended January 31] sales yesterday. It expects its top-line weakness to persist in fiscal 2019’s first half and hurt its bottom line. Tiffany’s stock was trading ~5% lower before markets opened today.

Tiffany’s top line declined YoY (year-over-year), reflecting lower spending by tourists, especially Chinese travelers. Lower demand among local customers, a stronger US dollar, and tough competition from low-priced fashion jewelry also dragged down its top line.

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Tiffany’s margins were weak during the reported quarter. Its gross margin narrowed by ten basis points, while its operating margin contracted by 300 basis points, reflecting higher marketing and incentive compensation and planned growth investments in technology and store presentations. Tiffany’s bottom line beat analysts’ expectation thanks to tax adjustments.

Key financial numbers

In fiscal 2018’s fourth quarter, Tiffany’s net sales fell 1.0% YoY to $1.32 billion, missing analysts’ estimate. Its comparable-brand sales stayed weak and fell 1.0%, reflecting lower demand.

Its gross margin narrowed by ten basis points to 63.8%. Benefits from lower input costs and a decline in diamond wholesales were offset by lower other sales and its operating margin shrinking by 300 basis points to 20.3% due to increased selling, general, and administrative expenses. Tiffany’s adjusted EPS of $1.67 beat analysts’ estimate of $1.60.


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