Briefing.com Story Stocks: Tiffany & Co. (TIF)
10/3/01 8:05 AM
Source: Briefing.com
22.45 +1.69: We've seen it before. A company warns of an earnings shortfall, and its stock goes up. Granted, that hasn't always been the case this earnings warning season, but in light of the aggressive discounting in stock prices that took place following the terrorist attacks, it's not the aberration it normally is during an earnings warning period. Tiffany & Co., the internationally renowned jeweler and specialty retailer, is the latest beneficiary of the market's counter-intuitive response as it is trading up nicely today on the heels of-- what else-- an earnings warning. Citing restrained customer spending, which intensified following the tragic events of Sept. 11, TIF said it expects net sales to decline approximately 10% in Q3. Much of the blame for the shortfall was placed on lower sales in the company's U.S. retail channel of distribution as international sales, while below expectations, were down to a lesser extent. Hoping to provide some color for investors, TIF indicated comparable U.S. store sales dropped 19% in the August-September period and included a 36% decline since Sept. 11. The rate of decline has since abated as comparable store sales were down 19% in the final week of September, but clearly, TIF's customer base isn't as freespending as it once was. Subsequently, TIF has lowered its earnings expectations to $0.12-$0.15 per share for Q3 (Multex consensus is $0.20), to $0.49-$0.56 for Q4 (consensus is $0.56) and to $1.05-$1.15 for FY01 (consensus is $1.19). Looking further out, TIF expects "modest earnings growth" for FY02. The latter is somewhat disappointing, but it hasn't been too much of a stumbling point as the market is beginning to recognize that it behooves the retailers to err on the side of caution at this point. Long-term investors in TIF should take note of that epiphany as Briefing.com believes the stimulative impact of monetary and fiscal policies will open the door for positive surprises in 2002. The bigger question, of course, is when in 2002? The consensus opinion seems to be mid-2002 (which means it probably won't be mid-2002). In any case, the uncertainty regarding the answer to that question should act as a restraining influence on TIF over the near-term, but given its discounted valuations, the strength of its brand, and easier comparisons, TIF represents a compelling investment option for those with a long-term mindset.-- Patrick J. O'Hare, Briefing.com
