Tiffany & Co. (TIF) shares initially opened down 5.3% in early trade after reporting disappointing holiday sales. Worldwide comparable sales for the two-month holiday period ending in December declined 2%. In the Americas, both total sales of $483 million and comparable store sales were 4% below the prior year. On a constant-exchange-rate basis, total sales declined 4% and comparable store sales declined 3%. Management attributed the lower sales to local customer spending, with a decline in U.S. sales exacerbated by a 14% decline at the Company's Flagship store on Fifth Avenue in New York, which we attribute at least partly to post-election traffic disruptions. The company also affirmed full-year 2016 EPS to decline mid-single digits year over year. The company also trimmed full-year capital expenditures from $250 million to $240 million.
CEO Cumenal noted, “These overall holiday period sales results were somewhat lower than we had anticipated, but we continue to benefit from a favorable gross margin and prudent expense management. Although we do not anticipate any significant improvement in 2017 to the macroeconomic challenges that we faced this year, we continue to focus on our initiatives to enhance our stores and our customers' experience, and to add newness to our product assortment, while maintaining effective marketing communications and a well-developed supply chain. We believe executing on these initiatives, which are within our control, will contribute over the long-term to strengthening Tiffany's competitive position among global luxury brands.”
Price action on the TIF daily chart shows that after the holiday sales release, the 50-day SMA tentatively held. If we see downward momentum accelerate, initial support will come from the $75.56 level. Deeper support will come from the $70.43, it is around that area that price could form a bullish ABCD pattern. If valid, we could see a bullish reversal target the 50-day SMA. If we do not see further weakness and the bullish trend returns, further upside could eventually target the psychological $90 handle.
The Trade: Buy TIF at $71.75, with a stop loss at $69.75 and a take profit at $77.95. The Risk/Reward Ratio is 1:3