Tiffany’s Shares Rise in Spite of Disappointing Earnings

by | Aug 28, 2019 | Markets

The company’s sales and earnings shrank during the second quarter.

On Wednesday, Tiffany & Co released its second-quarter earnings report before market open. Shares of Tiffany declined by nearly 35% over the past year as the company continues to report slowing sales and growth.

So heading into the earnings call, investors were expecting bad news but they weren’t expecting it to be as bad as it was. Tiffany CEO Alessandro Bogliolo reported slow sales and reduced earnings. 

However, Bogliolo did maintain the company’s guidance for the rest of 2019. Here is a breakdown of the second-quarter earnings report:

  • Revenue declined by 3% from a year earlier to reach $1.05 billion.
  • Net income declined by 6% from a year earlier to reach $136 million.
  • Earnings per share declined by 4% from a year earlier to reach $1.12.

What happened during the second quarter?

Like many U.S. companies, Tiffany’s sales were affected by the ongoing trade war between the U.S. and China. But the biggest issue affecting the company during the second quarter is decreased tourist spending. 

Shopping at Tiffany is pricey and for foreigners, it’s even more expensive right now, thanks to the strong U.S. dollar. The company’s holiday sales dipped after a drop in spending by Chinese and other international tourists. 

This slump continued well into the first half of 2019. The company’s sales were also affected by street protests in Hong Kong.

Tiffany saw the steepest sales declines in the U.S. and Europe. In-store sales, a key way investors measure the company’s profitability, fell in the U.S. by 4%. In Europe, total sales fell by 4% while comparable sales fell by as much as 6%.

In the Asia-Pacific region, total sales fell by 1% and comparable sales fell by as much as 3%. Management said this was mostly due to the impact of foreign currency transaction. Tiffany managed to hold the line on its total sales in Japan but comparable sales still fell by 1%.

Can Tiffany & Co bounce back from this?

Perhaps the company’s one saving grace was that it maintained its guidance for the rest of 2019. Tiffany still expects to see its net sales and earnings increase for the year, though by single-digit percentages. Bogliolo also said the company’s sales grew by 20% in mainland China.
This seemed to be enough to give the stock the temporary boost it needed. The company’s shares were up 4% by mid-morning on Wednesday.