3 Reasons Tiffany & Co. Is The Best Positioned Luxury Brand

• Tiffany & Co. TIF shares have been volatile over the past three months, and are down 5 percent since August 25.
• Morgan Stanley’s Kimberly C Greenberger maintained an Equal-weight rating on the company, while raising the price target from $90 to $91.
• Tiffany’s 3Q results provided relief, and the company could return to positive EPS revisions in 2016, Greenberger said.

Tiffany reported North America comps of -6 percent, which was better than the Morgan Stanley estimate of -8 percent. Moreover, Canada and Latin America comped positively during the quarter. Thus, the company’s US same store sales are expected to have been in-line with expectations, analyst Kimberly Greenberger said.

In view of the highly volatile US stock market environment and the company facing very tough comps, the result appear “solid,” Greenberger noted. Tiffany reduced its y/y EPS growth guidance for 2015 from -2 to -5 percent to -5 to -10 percent. Despite this, the company raised its FCF guidance by $100M to more than $500M.

The analyst pointed out that Tiffany’s 3Q constant currency sales growth and comps continue to be robust, while the company generated y/y gross margin expansion of 70 bps, and its SG&A expenses remain under control.

Greenberger believes that Tiffany is among the best positioned luxury brands for three main reasons:

1. Tiffany would not need major pricing adjustments, since its global pricing architecture is “more harmonized than that of most global luxury retailers.”
2. The company is expected to end the year with only 309 stores, and is not over stored.
3. Tiffany is less dependent on Europe and China than other luxury players, which can prove to be “a significant advantage given near-term volatility and macro uncertainty.”

In the report Morgan Stanley noted, “We are rolling our price targets to reflect 2017 EPS estimates…TIF remains a strong global luxury brand with a potential return to positive EPS revisions in 2016. Even after today's +4% move, we see 15% upside to our $91 price target and would add to positions here. TIF is our favorite Equal-weight rated name.”