Is the dol­lar re­ally why Tif­fany low­ered earn­ings

Financial Mirror (Cyprus) - - FRONT PAGE - By Chris Lange

Tif­fany & Co. (NYSE: TIF) re­ported low­erthan-ex­pected sales re­sults for the two-month hol­i­day pe­riod ended De­cem­ber 31. The sales re­sults were con­sid­ered dis­ap­point­ing by ex­ec­u­tives due to head­winds from a strong U.S. dol­lar. As a re­sult, the company is also low­er­ing its guid­ance for the full year.

For the fis­cal year end­ing on Jan­uary 31, Tif­fany is fore­cast­ing a net earn­ings range of $4.15 to $4.20 per di­luted share. The pre­vi­ous fore­cast range was $4.20 to $4.30. This rep­re­sents an in­crease of 11% to 13% from the pre­vi­ous year’s earn­ings of $3.73 per di­luted share.

Thom­son Reuters had re­cent con­sen­sus es­ti­mates $4.32 in earn­ings per share and $4.32 bln in rev­enue.


Over­all, world­wide net sales were re­ported as $1.02 bln, which was 1% lower than the pre­vi­ous year. Ac­cord­ing to the company, on a con­stant-ex­change-rate ba­sis, which ex­cludes the ef­fect of trans­lat­ing for­eign-cur­rency-de­nom­i­nated sales into U.S. dol­lars, world­wide net sales in­creased 3% and com­pa­ra­ble store sales were flat from the pre­vi­ous year.

On a re­gional ba­sis, Asia-Pa­cific to­tal sales rose 10% and com­pa­ra­ble store sales in­creased 6%. Ja­pan to­tal sales fell 3% and com­pa­ra­ble store sales de­clined 8%, while Europe to­tal sales in­creased 9% and com­pa­ra­ble store sales rose 4%.

De­spite the dis­ap­point­ing sales over­all, the company’s Pres­i­dent, Fred­eric Com­e­nal, said that Tif­fany has “mean­ing­ful global op­por­tu­ni­ties” to pur­sue over the long-term.

“For the com­ing year, how­ever, we are plan­ning cau­tiously as we an­tic­i­pate sig­nif­i­cant head­winds from the stronger U.S. dol­lar against all of our key cur­ren­cies that, as we ex­pe­ri­enced in the hol­i­day pe­riod, neg­a­tively af­fects both the trans­la­tion of re­sults and sales to tourists in the U.S.”

The company ex­pects to re­port its fourth-quar­ter and ful­lyear re­sults on Fri­day, March 20.

Tif­fany had a con­sen­sus an­a­lyst price tar­get of $111.29, which im­plies an up­side of 7.6% from last Fri­day’s close. The high­est an­a­lyst tar­get price was $125, which sug­gests up­side of 20.8%. Shares of Tif­fany were down 9% on Mon­day morn­ing after the warn­ing to $94.20, in a 52-week trad­ing range of $80.38 to $110.60.

In­vestors have known that the strong U.S. dol­lar would pose a risk for some time now. It is not as if this was a new trend, nor a trend that is ex­pected to rapidly re­verse. When com­pa­nies is­sue earn­ings warn­ings tied mostly or solely to cur­rency moves, it makes you won­der why man­age­ment did not take steps to prop­erly hedge their cur­rency ex­po­sure.

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