Bling It on, Tiffany

 | Aug 27, 2014 | 1:11 PM EDT  | Comments
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The real comeback kid of 2014 turns out to be Tiffany (TIF).

The home of bling has blown away expectations for both Q1 and Q2 this year. This is particularly noteworthy after the company could not get out of the cycle of miss-and-lower-guidance for nearly all of 2013. The blue box is now back on track with a new designer, a recently-announced new CEO and a renewed focus on fashion jewelry.

Most interestingly, while the rest of luxury retail has been citing a slowdown in Asia/Pacific, Tiffany managed to put up high-single-digit comps in the region with strength focused on Mainland China. In the U,S,, which represents 58% of sales, the company also increased same-store sales by high-single digits for the second-consecutive quarter. While we have been pointing out the importance of the mighty tourism dollar (particularly as the U.S. dollar has been weak) the gains in the U.S. also came from local customers.

So, where is the opportunity after TIF's outperformance in the first half of the year?

We would note in the Americas the comp has been driven by mid- to high-end purchases (think serious bling), while the under-$500 silver category has been struggling. While gold fashion jewelry has bounced back, there is plenty of opportunity for a fresh modern approach in the high-margin silver sandbox.  Tiffany is on the case. We would also point out a disappointing comp in Europe this quarter, which seemed to surprise the Street. But here is the truth: have you seen Sterling (U.K. is largest European region)? The Chinese, in particular, seem to be following the currency bouncing ball to the U.S.

Still, unlike a decade ago, Tiffany is truly a global brand. Add in a potential rebound in the high-margin silver category and we might have one of the few triple plays in retail (margin expansion, sales growth and no pushback on higher prices).

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