NEW DIRECTIONAL PUT PLAYS
Tiffany & Co. - TIF - close: 82.93 change: -3.44
Stop Loss: 85.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.5 million
Entry on March -- at $---.--
Listed on March 21, 2015
Time Frame: Exit PRIOR to May option expiration
New Positions: Yes, see below
Why We Like It:
The soaring U.S. dollar has turned into major headwinds for this luxury retailer. Half of TIF's revenues are outside the United States. Meanwhile 25% of its sales inside the U.S. come from tourists. The dollar's rally to multi-year highs has crushed both. The dollar's rise makes TIF's products more expensive in both scenarios. Their flagship store on Fifth avenue depends on tourists for 40% of their sales.
This company has been around for almost 180 years. The founder, Charles Lewis Tiffany, opened the first store in downtown Manhattan back in 1837. According to the company, "Tiffany & Co. is a holding company that operates through its subsidiary companies (the"Company"). The Company's principal subsidiary, Tiffany and Company, is a jeweler and specialty retailer, whose merchandise offerings include an extensive selection of jewelry (92% of net sales in fiscal 2013), as well as timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories. Through Tiffany and Company and other subsidiaries,the Company is engaged in product design, manufacturing and retailing activities. Today, more than 290 TIFFANY & CO. stores serve customers around the world."
Shares of TIF have come a long way from their bear-market lows below $17.00 a share back in 2009. In November 2014 the stock hit all-time highs near $110.00 following its Q3 earnings report. It was something of a surprise to see the rally considering TIF's earnings and revenues both missed Wall Street estimates. However, gross margins improved and the company was expecting a strong holiday season.
Unfortunately for shareholders holiday sales were not that strong. Shares of TIF collapsed on January 12th, 2015 when management lowered their 2015 guidance significantly below analysts' estimates.
At the time TIF lowered their 2015 guidance from $4.20-4.30 a share down to $4.15-4.20 compared to Wall Street's estimate of $4.35.
TIF just reported their Q4 results on Friday, March 20th, before the opening bell. Earnings improved from $1.47 a year ago to $1.51, which was in-line with the market's lowered estimate. Revenues declined -1.0% to $1.28 billion versus analysts' estimates of $1.3 billion. It was the first time in five years that revenues declined. The weakness was led by -1% drop in sales for the Americas region with comparable sales down -2%. While the Japan region reported sales down -13% and comparable sales falling -18%.
TIF's management warned that they expect the strong U.S. dollar to impact sales for the rest of the year. They're forecasting sales to drop -10% in the first quarter with earnings down -30% to $0.68 a share versus analysts' estimates of $0.91. They expect the decline to continue in the second quarter but at a more "modest" pace. They are painting a rosy picture for double-digit profit increases in the second half of this year but that might just be wishful thinking.
Management has adjusted their fiscal 2016 earnings to be $4.20 per share compared to Wall Street's $4.44. That's zero earnings growth from last year's $4.20 per (diluted) share.
TIF's President Frederic Cumenal commented on his company's results,
"By now it should be clear that Tiffany is facing challenges from global economic uncertainties, especially from the effect of a strong U.S. dollar on the translation of foreign-denominated sales into dollars and on foreign tourist spending in the U.S. As a result, we have adopted a cautious approach in our planning for the coming year."
Technically shares are in a new bear market and just closed at new 52-week lows. The point & figure chart is bearish and forecasting at $75.00 target.
Tonight we are suggesting at trigger to buy puts at $82.65.
Trigger @ $82.65
- Suggested Positions -
Buy the MAY $80 PUT (TIF150515P80) current ask $1.68
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open, up or down, more than $1.00 from our suggested entry point.
Option Format: symbol-year-month-day-call-strike