What happened?

There were many negative headlines about Tiffany & Co. after the company delivered its earnings report, and yet the stock is pushing higher. Let’s find out what’s really happening. 

Actually, the mystery can be explained by the two simple words: mixed data. On the one hand, the luxury jewelry retailer’s Q4 earnings beat expectations. On the other hand, net and same-store sales missed forecasts. When things like that happen, investors are firstly disoriented. Then either buyers or sellers win and set the direction for the price. The question is how sustainable the move of the market will be.

Why is it important?

Let’s put in some numbers. Tiffany’s EPS rose to $1.67 and revenue equaled $1.32 billion, while analysts projected $1.60 and $1.33 billion. The company expects sales to rise in the low single-digit percentage range in fiscal 2019. On the downside, comparable store sales declined by 1%.

For investors

Tiffany is a worldwide present retailer. Given the current environment, it’s not hard to see what its problems are. The list is standard: concerns about the global economic slowdown, lower spending by Chinese consumers, and the strength of the US dollar. These problems haven’t gone away. The company itself explained lower sales by the decline in spending done by foreign tourists.

However, what the market probably saw in Tiffany is that the company doesn’t have many internal problems, only external challenges. In addition, it may perform better in the second half of the year because the base for comparison will be lower due to the turbulent end of 2018. As for Asia, the fact is that Tiffany’s products are in demand there: sales rose by 13% in Asia-Pacific for the full year. All in all, if global growth recovers, so will Tiffany’s sales.

In the long-term, the company’s success will depend on its ability to adapt its brand to the younger audience and refresh its image.    

For traders

The stock is up by more than 20% since the start of the year. The company has warned investors that Q4 results wouldn’t be shiny beforehand, so the market was quick to recover. If the price manages to end the week above 100-week MA at $103.00, it will get a chance to proceed up to 50% Fibonacci retracement of the 2018 decline at $107.60. Support is in $100 area.

The weekly chart of Tiffany & Co
Tiffany & Co, weekly chart

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