Tiffany's (TIF) Admits: The Recession Ate Us For Breakfast

Way back in October we realised that luxury jeweler Tiffany & Co was projecting much too rosy numbers for its fourth quarter and Wall Street’s analysts weren’t doing any better. The company was projecting earnings as high as $2.92 per share, reflecting expectations of a strong fourth quarter. Analysts weren’t quite that giddy: the consensus had Tiffany earning $2.58 per share.

Tiffany does something like 85 per cent of its sales in November and December, so its fourth quarter numbers are incredibly important. Its flagship shop in New York City accounts for a huge percentage of its sales. Unfortunately for the company and its investors, the world was waking up to a global recession in the final months of 2008. New York City, with its high percentage of jobs linked to finance, was not going to be the luxury merchandise paradise it once was.

None of this took a lot of hard maths or analysis to figure out. It was just the application of our observations about the world to the specific circumstances of a public company dependent on an elevated level of consumer spending. And, of course, the fact that analysts and company executives hadn’t adjusted their expectations to reality. It was obvious to us, and lots of other folks, that discretionary consumer spending was going to take a huge hit in the fourth quarter.

But what really did it for us was an accident. We walked into a jewelry store in October and found that prices were up and sales were off. “People are still buying wedding rings,” the girl behind the counter told us. “But they are holding off on optional jewelry.” Since pretty much all Tiffany jewelry is optional–no one needs to pay extra for a blue box–we were pretty certain the company was in for some trouble.

So why are we going on about Tiffany again? It’s certainly not to pat ourselves on the back. Like we said, there was nothing especially brilliant about our Tiffany call and we lucked into a key part of our insight. We’re writing about Tiffany because they just guided even lower. After lowering guidance in November to $2.30 to $2.50 per share, Tiffany today lowered guidance to to $2.25 to $2.30.  Wall Street analysts, it seems, were once again under-estimating the impact of the recession. The consensus on earnings had been $2.37.

From Bloomberg:

Tiffany & Co., the world’s second- largest luxury-jewelry retailer, said holiday sales fell 21 per cent as wealthy consumers reduced spending amid the global financial crisis. The chain cut its annual earnings forecast.

Revenue from Nov. 1 to Dec. 31 fell to $687.4 million from $867.3 million a year earlier, New York-based Tiffany said today in a statement distributed on Business Wire. Sales at U.S. stores open at least a year declined 35 per cent.

Sales at Tiffany’s main New York store also fell by about a third. Jewelry sales have slowed as rich shoppers, made nervous by seesawing stock markets, sinking home values and Wall Street job cuts suspended purchases of luxury goods…

Tiffany reduced its per-share profit forecast for the year ending Jan. 31 to $2.25 to $2.30 from as much as $2.50, excluding any job-reduction costs. Analysts expect profit of $2.37, the average of 12 estimates compiled by Bloomberg.

Tiffany’s November and December sales represent about 80 per cent to 85 per cent of the jeweler’s fourth-quarter sales, spokesman Mark Aaron said Jan. 9.

Tiffany had 206 stores and boutiques, including 76 in the U.S. as of Dec. 31.

Retailers’ sales at U.S. stores open at least a year fell 2.2 per cent in November and December from a year ago, the biggest decline in four decades, the International Council of Shopping centres, a New York-based trade group, reported Jan. 8.


  • Markets Prepare To Eat Tiffany’s For Breakfast
  • Tiffany (TIF): Another Awful Month
  • Tiffany (TIF): Beats and Misses Analyst Expectations
  • Tiffany (TIF) Slashes Prices 15%


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