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Tiffany CEO stated that the company is certain that a recovery is imminent even though each of its shares lost 53 cents in Q1. TIF stock is 2% up today.
Jewelry maker Tiffany & Co (NYSE: TIF) announced on Tuesday that its same-store earnings are down by 44% in its Q1 fiscal reports. This is the effect of the coronavirus pandemic that resulted in the company shutting its stores globally during the restrictive lockdown. Tiffany stock closed at $122.18 yesterday. It has been trading lower than the $135 per share benchmark agreed upon. Tuesday figures show 2% gains as the markets opened.
The company’s CEO Alessandro Bogliolo said that the easing of the lockdown has seen the company’s jewelry business rebound in China. This became obvious after talks of a merger with French retailer LVMH (EPA: MC) scaled some regulatory hurdles.
Chinese Market Leads Recovery and Can Boost Tiffany Stock Rise
Bogliolo stated that the company is certain that a recovery is imminent even though each of its shares lost 53 cents in Q1 which ended April 30. Revenue grossed in the same period is $555.5 million. This amounts to a net loss of $64.6 million.
The result is contrary to the expectation of analysts consulted by Refinitiv. The projection was that Tiffany would have made gains of at least 3 cents per share, considering that the company was in the green region this time last year when it made a profit of $125 million.
The expected deal with LVMH is responsible for the positive outlook of the Tiffany top executive. LVMH owns the top of the range companies such as Louis Vuitton, the handbag company and Dom Perignon, the champagne maker. It is eyeing Tiffany which it planned to buy for $16.2 billion in November 2019.
The coronavirus pandemic threw a spanner in the works as Tiffany earnings plummeted after its stores were shuttered. This prompted the LVMH CEO Bernard Arnault to propose a reduction in the valuation of the deal.
Adversely Affected by Social Restrictions
With weddings and parties mostly on hold, the jeweler faces uncertain times. These are the main events that prompt the use of luxury goods such as expensive bracelets and earrings. Restrictions placed on socializing is hurting Tiffany. Neil Sauders, the managing director of GlobalData said that this trend may continue as fewer tourists move to big U.S. cities.
Saunders whose company is a retail consulting firm said that the rise in sales of jewelry in China is not indicative of the response expected in other countries. He said that Tiffany customers in China were driving double-digit growth of the company’s sales there prior the pandemic.
He said that the company’s foresight at strengthening its China business made it more resilient. He added that just like other retailers, Tiffany was badly affected by the coronavirus pandemic.
Another positive for Tiffany is regulatory approval from antitrust agencies in Russia and Mexico. With others still pending, Tiffany rightly has a positive outlook for the future. Its Chinese sales which were down 85% at the peak of the plague has recently gone up by 30% in April and May.
Bogliolo said its bright spots are its collection of rose gold with diamond. He said:
“I am confident that Tiffany’s best days are ahead …we will take that journey with LVMH by our side.”
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