Tiffany Loses Their Sparkle on Poor Q1 Earnings

Tiffany Loses Their Sparkle on Poor Q1 Earnings
May 26, 2016

Luxury jewelry retailer Tiffany & Co. (NYSE:TIF) reported its fiscal 2016 first-quarter earnings and revenue that missed analysts’ estimates. Following the earnings report, the stock closed at $63.89 on Wednesday. Considering the downward looking fiscal 2016 revenue guidance issued by the company and the overall decline in the high-end retail sales, we can expect the share price to remain bearish in the second-quarter.

The New York based company had warned in the fourth-quarter of 2015 that profits would decline in the first-quarter of 2016. So, Wall Street had absolutely no positive expectation from the company.

The first-quarter revenue of $891.3 million came below the analysts’ expectation of $924.1 million. In the similar period last year, the company had reported revenues of $962.4 million.

Barring Japan, Tiffany did not fare well in any of the regions it operates. On a GAAP basis, the revenue declined 8% in America, 8% in Asia & Pacific and 9% in Europe. The company’s revenue increased 8% in Japan. On a constant currency basis, the gain in revenue is only 1% in Japan.

The comparable store sales in America declined 10%. The Asia-Pacific region and Europe registered a much steeper decline of 15%. Japan was an exception with a 12% rise in the comparable store sales.

Similarly, the earnings for the first-quarter were $87.5 million or $0.69 per share, down from $104.9 million or $0.81 per share in the first-quarter of fiscal 2015. Excluding the tax benefit, Tiffany earned $0.64 per share in the first-quarter. The consensus estimate of analysts is $0.68 per share.

The high end retailer also issued discouraging second quarter guidance. During the second-quarter, the company expects a 15% decline in the earnings of $0.84 per share reported in the first-quarter last year. This works out to be approximately $0.73 per share. The second-quarter earnings estimate of analysts is $0.79 per share.

For the fiscal year 2016, Tiffany anticipates about 5% decline in the profit compared to last year. The Wall Street estimates a 2% decrease (y-o-y basis) in the earnings to $3.75 per share. The company also trimmed its previous revenue guidance of $4.1 billion. Tiffany now believes that revenue would fall by a single digit percentage from $4.1 billion reported last year. The revenue estimate of analysts currently stands at $4.1 billion for the fiscal 2016. Thus, considering these facts, a rebound in the share price is unlikely during the second-quarter.

The stock is clearly moving within a descending channel. The next support for the stock is at 50. The RSI indicator, as the sub-chart reveals, is inclined downwards with a reading below 50.

Tiffany's - Technical Analysis - 26th May 2016

Considering the bearishness, a binary option trader should pick up a one touch put option contract to gain from the probable downtrend in the price. A target price of $55 or above is recommended for the trade. By choosing an expiry date in the last week of June, a trader can best position himself in the trade.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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