For the luxury goods giant Tiffany & Co
First, in January, controversy surrounding President-Elect Trump and the Trump Tower caused a decline in Tiffany's holiday sales. Tiffany's Fifth Avenue flagship store was hurt by the presence of police, journalists, protestors, and spectators around its neighbor Trump Tower. A January 17 report by Tiffany showed that November and December sales at the flagship store were down 14% compared to last year. Trump's rise has contributed to Tiffany's misfortune.
For Super Bowl Sunday in February, Tiffany partnered with music sensation Lady Gaga for its spring campaign. The company hopes that the new campaign would evoke success similar to past partnerships with icons like Marilyn Monroe and Audrey Hepburn. In particular, Tiffany will gain access to marketing to Lady Gaga's over 65 million Twitter followers. Tiffany's one-minute Super Bowl ad, the company's first ever, has garnered over 4.5 million views.
That same day, surprising news came out. Tiffany's Chief Executive Officer Frederic Cumenal announced his resignation, effective immediately. He had joined the company in 2011 and been CEO since April 2015. Michael Kowalski, chairman of the board of directors, became interim CEO. Under Cumenal's leadership, Tiffany's stock price dropped 6.6%, worse than the S&P 500. In addition, global sales, especially in Europe and the Americas, fell during Cumenal's tenure. Tiffany is searching for a new permanent CEO.
Some financial analysts have accordingly revised Tiffany's outlook. On February 6, Mizuho Securities downgraded the stock from buy to neutral, with a price target down from $90 to $74. On February 8, Zacks Investment Research downgraded the stock from buy to hold. On February 10, HSBC Holdings downgraded the stock from buy to hold, with a price target of $87. On February 11, William Blair cut Tiffany's fiscal year earnings per share estimates from $3.68 to $3.58. In general, it seems the financial industry believes the unexpected CEO departure will not bode well for Tiffany's performance.
Tiffany has taken steps to envision its future. Interim CEO Kowalski stated that the company is focusing on improving customer experience, maximizing marketing efficiency, cutting costs, continuing capital expenditures, and introducing innovative new products. The company has also unveiled a remodeling of San Francisco's Union Square store and anticipates strong Valentine's Day sales, as jewelry is consistently a popular gift.
Tiffany's troubles reflect the entire luxury goods sector, which has undergone some executive departures and subpar stock performance recently. In addition, Tiffany has worried about a strong dollar and volatility in Asian markets. On March 17, when the company reports its fourth quarter earnings and gives guidance, investors will learn if there is still sparkle or trouble at Tiffany's.
The author does not hold any positions in any of the stocks above.
