Tiffany Forecast Trails Estimates on Labor Costs

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March 21 (Bloomberg) -- Telsey Advisory Group Vice President and Analyst David Wu discusses his outlook for Tiffany on Bloomberg Television’s “In The Loop.” (Source: Bloomberg)

In terms of the overall results, while it did come in below expectations, the overall business fundamentals are sound at tiffany.

I have encouraged the january did maintain pace from the holiday season despite adverse weather conditions.

They did see robust gross margin expansion.

That was really german by lower commodity costs and price increases implemented earlier.

The margins are significant.

You are paying for the brand.

For the blue box.

People are willing to do that.

Let's talk about the weaknesses we saw.

In terms of the overall weaknesses, it will be higher as g&a. sg&a expenses were up three percent in the quarter.

The second mrs.

Due to a higher tax rate.

That was two cents of the miss.

If you think about the fundamentals, we are very sound.

Let's look at the stock and see where was trading.

It was down in the free market, even though we do have sales climbing and matching estimates.

Where does the stock go from here?

It has gained about 34% in the past year, can it keep up momentum?

Absolutely.

Really?

30%? the initial guidance that they provided is actually conservative.

Even though they are facing higher interest expenses related to higher debt levels taken to pay out the arbitration charge.

We could see upside.

But with the amount?

472 million.

We could see upside to the guidance on better than expected trends.

Especially in the back half of the year.

I'm excited that a the new product launch is coming up in september.

They have a new designer, who basically produced jewelry for chanel and barneys.

She is bringing high design prowess to tiffany's and unveiling a new design in the fall that could drive and elevate the brand.

What is the price point?

The initial fashion line that their launch in the fall -- the sweet spot will be 700 and $3000. why is that a sweet spot?

This is the fashion jewelry category.

It elevates tiffany, but also makes the product more accessible.

I said to you in the commercial break, why would anyone buy a diamond to tiffany if you know that the margin that they're getting is so much more than other diamond dealers?

You said it comes down to brand.

This is an example of how brands can be powerful.

Tiffany is the ultimate american luxury jeweler.

They have very strong brand cachet globally, especially in asia.

When you think about the cut of other tiffany diamond rings, it is very unparalleled in terms of the quality and the exclusivity of the design.

All right.

David blue at telsey advisory group, thank you.

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