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What's Hurting Tiffany & Co.?

By Motley Fool Staff - Mar 26, 2016 at 9:21AM

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The fine-jewelry seller is looking ahead at a few issues that will cut into its sales, but there's good reason not to think of it like most other retailers.

Despite higher-than-expected fourth-quarter profits, Tiffany (TIF) recently posted significantly weaker guidance for 2016.

In this clip from the Motley Fool Money podcast, Jason Moser shares with Chris Hill two factors that are hurting the retailer's sales this year. He also explains why long-term investors shouldn't be too worried about the news, and why the jeweler's bleak guidance is not that big a deal.

A full transcript follows the video.

This podcast was recorded on March 18, 2016. 

Chris Hill: Tiffany's fourth-quarter profits were higher than expected, but their guidance for 2016 was a little grim, Jason.

Jason Moser: Well, sure, but I mean, there are a number of reasons for that. I think what differentiates Tiffany from other retail investments -- and we've talked about this before -- it's the power the brand holds. If we look at their one greatest asset, it really is that brand. It's not affordable luxury, and I don't think they ever will be. If they do go that affordable luxury route, then I would be a bit concerned as an investor.

But there are a number of factors that are working against Tiffany right now: The stronger dollar's not only hurting sales overseas, but it's also hurting the tourist sales within the United States. Typically, tourists will come into the United States, and Tiffany is one of those brands that they'll flock to. We're not seeing that same kind of strength there. Also, another interesting note I read about here, the average Wall Street bonus fell 9% in 2015. This is something that I think you could also say would have an effect on a business like Tiffany, because it is such a luxury brand.

Again, though, I think this management team has done a very good job through the years of sticking to their guns, sticking to what they know. They're not going to be running these promotions to try to gin up sales. You have to kind of take your lumps with this one. And any time you see that stock at under 20 times earnings, I think you have to take a little bit of a closer look, because it is a retail brand that has a bit more staying power than your typical fashion retail brands that you'll find out there.

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