Tiffany dismisses setbacks as Louis Vuitton Moët Hennessy readies for potential involvement
In a recent analyst report, Credit Suisse's Michael Binetti suggested that ongoing investment is necessary for Tiffany & Co., given the volatility in same-store sales. This comes as the luxury jewellery retailer's stock is no longer trading on fundamentals, having accepted a takeover offer from LVMH at $135 per share (pending necessary approvals).
The third quarter was a mixed bag for Tiffany & Co. Net sales globally remained flat at $1 billion, but net earnings tumbled 17% to $78 million from $95 million a year ago. In the Americas region, net sales decreased by 4% to reach $423 million, and store comps fell 4% company-wide but were flat elsewhere. Gross margins also shrank to 61.7% from 62.2% due to a shift toward higher priced jewelry.
Wells Fargo analysts consider the domestic business of Tiffany & Co. an issue, as Americas comps declined for the third quarter straight. The fall-off in spending by tourists is attributed to outside forces like a strong dollar.
In an effort to boost sales, Tiffany & Co. is unveiling a men's pop-up store on East 57th Street in New York City. The pop-up store, which will be open from Friday until January 6, 2020, serves as a preview for its two-year home during the transformation of its Fifth Avenue flagship. The idea for the store came from fashion designer Thom Browne.
The pop-up store features a collection of accessories, barware, home objects, games, limited quantities of Tiffany x Spalding basketballs, a specially designed Tiffany Blue Indian Scout motorcycle, and a handcrafted Tiffany Blue Blatt Billiards pool table. Major sports trophies handcrafted by Tiffany in Rhode Island for 160 years are also on display.
The takeover of Tiffany & Co. by LVMH, if it goes through, will impact Tiffany shares based on LVMH's broader fortunes. Analysts did not feel the need to hear from Tiffany executives due to the pending takeover by LVMH. The Street was modeling a slightly positive comp domestically, but this was a significant disappointment.
Tiffany & Co. is currently in the process of being sold to French luxury conglomerate LVMH for $16.2 billion. Net inventories as of Oct. 31 were 4% above the prior year, and the pop-up store is scheduled to close in December 2025. Tiffany & Co. is on pace for its first year of declining gross margin since FY12.
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