Tiffany (TIF) could struggle over the next couple of quarters, as the company faces difficult year-over year sales comparisons and could see sales slip in China and Korea, CLSA analyst Barbara Wyckoff wrote.
Wyckoff downgraded shares to Outperform from Buy.
Luxury sales were weak in Korea and China in April, Wyckoff asserts, and her channel checks show that U.S. jewelry sales “stalled” last month.
She expects comparable store sales to decline in the first and second quarters, but improve in the third quarter and reach mid-single-digit growth by the fourth quarter.
The comp sales slowdown could quickly hit EPS.
“We have stress tested the TIF model. What is clear is that as comp sales slow, earnings quickly reflect the lack of leverage on TIF�s high fixed costs. Approximately 80% of Tiffany�s expenses in SG&A are fixed (occupancy and corporate). Manufacturing, distribution, the merchandising and diamond divisions are the fixed components in cost of goods sold.”
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