Tiffany Sees Better-Than-Feared 4Q Profit Aided By Online Sales

Tiffany & Co. provided upbeat 4Q EPS guidance of a mid-to-high single-digit growth. Analysts expect 4Q earnings of $1.73 per share, which is 3.6% higher from the year-ago period. The jewelry company forecast 4Q sales will decline in mid-single-digit percentage and operating earnings to increase in mid-single-digit rate compared with the year-ago period.

Tiffany (TIF) also reported preliminary sales and operating earnings for August and September 2020. The company posted slightly lower sales in the two-month period as compared to the year-ago numbers, while operating earnings rose 25%. However, global e-commerce sales almost doubled in the two-month period from the year-ago period.

Tiffany’s CEO Alessandro Bogliolo said, “While we still expect full-year results to be substantially impacted by COVID-19, we are very pleased with the way the business has rebounded following the first quarter and continues to rebound in the third quarter, especially in Mainland China, and to recover in the United States.” The company expects U.S. sales trends to further improve in the fourth quarter. (See TIF stock analysis on TipRanks)

Tiffany is currently in a legal battle with Louis Vuitton owner LVMH and has filed a lawsuit against the company last month, enforcing the $16 billion merger agreement between them. According to a Reuters report, European Union (EU) antitrust regulators are reviewing the LVMH-Tiffany deal with a regulatory decision on the deal expected by Oct. 26.

On Sept. 10, Needham analyst Rick Patel maintained a Hold rating on the stock. Patel said that “Covid-19 has caused retail valuations to re-rate lower but we believe a deal could still happen if TIF is willing to ease its takeout price from $135, but we’re not clear if it’ll budge. Without a deal, we’d expect TIF to trade lower but just how much is debatable as the lingering potential for a takeout would likely create some support.”

Currently, the Street is sidelined on the stock with a Hold analyst consensus. The average price target of $126 implies upside potential of about 5.3% to current levels. Shares are down by about 10.4% year-to-date.

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