Tiffany Poised to Continue Fall

Posted: May 27, 2012 at 6:13 pm

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By Tom Gibbs - May 27, 2012 | Tickers: COH, LVMUY.PK, RL, TIF | 0 Comments

Tom is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

The luxury goods sector has been a rather mixed bag since the industry initiated its rebound from post-2009 trough levels. Top lines in most of the industrys niches leather goods, watches/jewelry, upscale apparel, etc. have generally increased year-over-year, yet continued spending on operational rightsizing, rather volatile prices in raw material markets, and a slight pull back in consumer confidence levels have translated into a less-than-robust jump in company profits.

Undoubtedly one of the most disappointing performers as of late has been jewelry retailer Tiffany & Co. (NYSE: TIF), which hit a new 52 week price low following the release of its Q1 2012 filing. Coming off a relatively weak performance in Q4 2011, the corporation posted:

The saving grace for the jewelry retailer was its increased penetration into emerging markets, yet despite the continually increasing sales in Asia/Pacific and Japan (sales increased 17% and 15%, respectively, for both markets in the quarter), Tiffany has released weakened full year 2012 sales and earnings guidance.

Even with the correction in price during trading on Thursday the stock closed down 7.7% but fell by as much as 10.7% in intraday trading there are several signs that Tiffanys has not yet reached the bottom.

Jewelry Market is Slowing

It would be one thing to say that tweaking Tiffanys own operations amongst a generally improving jewelry market will yield improved performance in the near future. It is more troubling to note the reality: stagnated growth in Tiffanys industry, following a swift rebound from mid-recessionary lows, implies that most performance improvement will come from market share gains in an extremely fragmented competitive landscape.

MasterCards recently released SpendingPulse report, which tracks retail sales across all payment forms, has shown that the jewelry market has taken the largest hit among all generally slowing luxury good sales. Following a meaningful 13.0% and 6.7% jump in Q4 2011 and Q1 2012, respectively, luxury sales as a whole slowed to a more manageable 1.8% increase in April. Sales in the jewelry category experienced much less robust improvements in each of the comparable periods: 7.4% increase in Q4 2011, 5.3% increase in Q1 2012, and a 3.7% decrease this past April.

The data holds up when comparing Tiffanys recent performance with other players in the broader luxury goods industry:

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Tiffany Poised to Continue Fall

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May 27th, 2012 at 6:13 pm