Tiffany reported flat global holiday sales, well below expectations for a gain of around 4 percent. The Americas segment—which accounts for about half of sales—was down 1 percent.
Of greater concern, the company is lowering the fourth-quarter outlook to between $4.15 and $4.20 a share, versus prior of between $4.20 and $4.30 a share, which is well below FactSet's $4.82 a share consensus. The initial outlook for 2015 sales is again low- to mid-single-digits. Is the strong dollar hurting tourism? Maybe. That seems to be the explanation.
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Tiffany Holiday Sales:
- Americas: down 1%
- Asia-Pacific: up 6% (a little better than expected)
- Japan: down 8% (weak)
- Europe: up 4% (a little better than expected)
Here's the problem: Tiffany is fairly expensive, at nearly 21 times forward earnings. If that drops to, say, 18 times forward earnings (now $4.86 for 2016), we are talking about roughly $87. But that is also assuming a roughly 6-percent gain in revenues; now that Tiffany is talking about low- to mid-single-digit gains, those numbers will be coming down as well.
My guess is that given the decent numbers from other retailers, this may be an anomaly.
Elsewhere:
1) Oil is at another 5.5-year low, but even stranger is natural gas, which continues to drop, defying an historical trend. I noted last week that our partners at Kensho have said that since 2004, natural gas has traded positive 70 percent of the time in the two trading days following the start of a major cold wave (which started last week), with an average return of 1.07 percent. That trade is not working!
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2) Speaking of Kensho, we were wondering what effect the Consumer Electronics Show might have on stocks. Corning, glass manufacturer for Apple and Samsung among others, trades positive 80 percent of the time two days after CES ends, with an average return of 0.97 percent. CES ended Friday.
3) Alcoa was upgraded to Buy at Nomura. I'll make this simple: the mineral producer is reducing capacity and investing more in the automotive business, and that has paid off. Shares were up 49 percent in 2014! But Nomura insists it is still not overvalued.
4) The 10-year Treasury yield remains below two percent this morning. Friday's jobs report, with its disappointing hourly earnings gains, has thrown a bit of a monkey wrench into the Fed's plan to begin lifting rates sometime in the middle of 2015. This is not a big problem for the Jan. 28 FOMC meeting, but it certainly gets a little more difficult in the March 18 meeting, when there is a press conference scheduled. That's when the members should give some signal that they are getting comfortable with raising rates—or not. The next press conference is June 17.