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Tiffany's Outlook Could Weigh Down High-End Retail

Tiffany & Co. lost some luster Tuesday after reporting strong third-quarter results and lower-than-expected guidance for the fourth quarter.

“The price action today is troubling. In a fairly quiet sideways market, we see Tiffany gapping down. Nordstrom has made a lower low nine of the last 10 days,” said trader Steve Cortes, echoing his retail prognosis from last week. “No retailers have pricing power right now.”

Tiffany traded midday at $66 per share, while Nordstrom was $44 per share.

Cortes said he was short retail against an S&P long.

“I think XRT, which has gone sideways for the last week despite all the euphoria about fabulous Black Friday sales … while the S&P has marched higher — I think that accelerates

“Holly Golightly, by the way — she really is Lula Mae, it turns out, from Texas,” he said. “I don’t think she’s spending enough at Tiffany.”

Resident retail expert Patty Edwards weighed in on Coach and Macy’s.

Coach: “They can change their fabrication, they can go to a thinner leather, they’ve got a little more presence by percentage in Asia,” she said. “In the short run, I think they’re actually going to be dragged down with the rest of the high end. So I wouldn’t be running to get into Coach at this point in time.”

Macy’s: “Everyone loves Macy’s, but Macy’s has got a huge presence on the East Coast, and that gives me a little pause, especially since so much of Bloomingdale’s is centered back there.”

All high-end retail stocks are not created the same, said trader Joe Terranova.

“This is the first quarter that you are going to have contraction in margins,” he said, noting that Tiffany’s EPS growth since Q1 2010 was up 30 percent.

“Guidance here implies EPS growth next quarter of only 3 to 10 percent,” he said.

Terranova was bullish on True Religion, which is benefiting from lower cotton prices, and Deckers Outdoor.

“You have to go inside, you have to look at the balance sheet here, you have to look at EPS, you have to look for potential for EPS growth. These are important things,” he said. “The story with Saks, the story with Ralph Lauren, the story with Tiffany, those were the stories of 2010. And the bar continues to get raised.

“You have to be more surgical now in the retail space to kind of find these,” he said. ”They’re about to emerge, the confidence begins to build right now.”


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Trader disclosure: On Nov. 29, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova Long SBUX, DECK, TRLG, LULU, CAT, CSCO, HES, SU, EMC, IBM, AXP, MUB, LQD; Edwards Long for Clients TGT, AAPL, CVX, PM, (Patty also personally owns), CBI; Cortes Long XLE, S&P 500, Treasuries, Short XRT, QQQ, DB; Dicker Long RIG;

Brian Kelly
Fund is long: AAPL, DE, CAT, CLNE, GLNG, IBM, MSFT, PM, SNDK, SYY, BRENT OIL, COPPER, FCX, AUSSIE DOLLAR, CORN FUTURES

Fund is short: Japanese yen, EWO

Camilla Sutton
Scotia Capital makes market in Australian Dollar and Euro

Michael Pachter
Wedbush Securities
No disclosures

Tavis McCourt
Morgan Keegan
No Disclosures

Amit Daryanani
Securities Recommended: Amphenol Corporation. Benchmark Electronics, Inc.. Celestica Inc.. Dell Inc.. EMC Corporation. Emulex Corporation. Flextronics International Ltd.. Hewlett-Packard Company. International Business Machines Corporation. Jabil Circuit, Inc.. Molex Incorporated. NetApp, Inc.. Plexus Corp.. QLogic Corporation. Sanmina-SCI Corporation. Seagate Technology. Sensata Technologies Holding N.V.. TE Connectivity Ltd.. Xyratex Group Limited.

Details / Comments: CNBC Business News

Disclosures

Sensata Technologies Holding N.V.: A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for Sensata Technologies Holding N.V. in the past 12 months.

Sensata Technologies Holding N.V.: A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services from Sensata Technologies Holding N.V. in the past 12 months.

Molex Incorporated: Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities of Molex Incorporated.

Celestica Inc.: RBC Capital Markets is currently providing Celestica Inc. with non-securities services.

Sensata Technologies Holding N.V.: RBC Capital Markets is currently providing Sensata Technologies Holding N.V. with non-securities services.

International Business Machines Corporation: RBC Capital Markets is currently providing International Business Machines Corporation with non-securities services.

Sensata Technologies Holding N.V.: RBC Capital Markets has provided Sensata Technologies Holding N.V. with investment banking services in the past 12 months.

Dell Inc.: RBC Capital Markets has provided Dell Inc. with non-investment banking securities-related services in the past 12 months.

Seagate Technology: RBC Capital Markets has provided Seagate Technology with non-investment banking securities-related services in the past 12 months.

International Business Machines Corporation: RBC Capital Markets has provided International Business Machines Corporation with non-investment banking securities-related services in the past 12 months.

Dell Inc.: RBC Capital Markets has provided Dell Inc. with non-securities services in the past 12 months.

Celestica Inc.: RBC Capital Markets has provided Celestica Inc. with non-securities services in the past 12 months.

Jabil Circuit, Inc.: RBC Capital Markets has provided Jabil Circuit, Inc. with non-securities services in the past 12 months.

Sensata Technologies Holding N.V.: RBC Capital Markets has provided Sensata Technologies Holding N.V. with non-securities services in the past 12 months.

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