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Earnings: Did TIF’s Blue Box Sell Better than Expected?

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August 24, 2016
Tiffany's Q2 results analyzed by stock investors.

When Tiffany (TIF) released its Q1 results last quarter and spoke to analysts on a conference call, it set the bar relatively low. Have the reduced expectations panned out or have luxury jewelers managed to restart sales in the last quarter?

Tourism, which typically powers the cash registers at hot TIF flagship stores in New York, Los Angeles, and Chicago, for example, had been lagging as the dollar strengthened, TIF said. Meanwhile, the strong dollar was also a drag on the bottom line because of currency fluctuations amid TIF’s strong sales abroad. Domestic sales were sluggish too, TIF said, as the consumer pulled back.

Could that have been a little too negative? Some analysts think so, including Deutsche Bank's Francesca DiPasquantonio. Yes, some of that appears to have happened, but “Luxury goods companies' Q2 results have generally come in less bad than expected," she noted in a recent research report.

If she’s right, there may have been more robin’s-egg blue boxes delivered with gemstones this past quarter than expected. 

Analysts reporting to Thomson Reuters have a consensus forecast of earnings per share at $0.72, a 16% drop from last year’s profit of $0.86 a share. Revenues for the quarter are expected to decline as well, off 5.4% to $937 million from $991 million in the year-ago period.

Short-term options traders have priced in a 5% potential share price move in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform from TD Ameritrade.

Options on TIF are typically not active, but there is some activity at the weekly 68-strike puts and 72-strike calls. The implied volatility is at the 34th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

FIGURE 1: BREAKOUT FROM MULTI-MONTH RANGE.

Since bottoming out in June, TIF shares have rallied by more than 20%, recently reaching above $70. Data source: Standard & Poor’s. Image source: the thinkorswim® platform by TD Ameritrade. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

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