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Want To Know How Tiffany's Sales Will Fare? Watch the Market

The stock market rally may help high-end jeweler Tiffany post its first quarter of positive same-store sales comparisons since the first quarter of 2008, Citigroup analyst Kimberly Greenberger said.

Tiffany Gift Box
Photo By: minxlj
Tiffany Gift Box

An analysis of Tiffany's performance since the first quarter of 1998 shows that 37 percent of the variance in the company's US same-store sales — which make up about 50 percent of its total sales — can be explained by moves in the S&P 500 Index six months earlier, Greenberger said in a research note.

So far this is playing out as Tiffany's sales are beginning to narrow their decline.

The six-month mark from when the S&P plummeted to lows under 700 came during the jeweler's third quarter, when its US same-store sales declined 10 percent — a significant improvement over the prior period, when same-store sales fell 27 percent.

Worldwide, same-store sales fell by 6 percent in the third quarter, compared to a 16 percent decline in the second quarter. And last week, the jeweler posted a 12 percent rise in US holiday same-store sales.

Because sales of luxury goods traditionally improve as the market climbs, the trend should continue as household net worth rises. Greenberger said she expects worldwide comparable sales to rise between 7 and 9 percent for the period ending Jan. 31, and raised her target price on the stock by $5 to $55.

On Tuesday, shares were trading at around $45.

"We expect a return to sustained positive [comparisons]," she said.

To be sure, Tiffany has a number of other factors helping it outpace the rest of the sluggish retail sector.

It has adjusted to hesitant shoppers by introducing inventory at lower price points, and by mitigating prices down 10 percent on its engagement rings — something the jeweler rarely does. But by maintaining premium prices on the majority of its jewelry, it has also kept up its prestige in an economy where other retailers diluted their brands.

Also, in an industry swarming with bankruptcies, stores such as Tiffany are likely gobbling up market share from failing mom-and-pop shops, she said. The store has also maintained a diverse array of inventory, which has helped attract shoppers despite their tendency to trade down.

"For these luxury retailers, their consumer can opt to spend, or frankly, can choose not to spend," she said. "The exciting thing that we're seeing now is that some of them are opting back in."

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