What Has Tiffany’s and Best Buy SMILING?
On Monday, two well-known struggling retailers received a much needed boost. Shares of Tiffany & Co (NYSE:TIF) and Best Buy (NYSE:BBY) both jumped as positive news gave shareholders a brief sigh of relief.
Tiffany, the world’s second largest luxury jewelry retailer, reported that net income for the three months ended July 31 increased 2 percent to $91.8 million (72 cents per share). In comparison, the jewelry earned $90 million (69 cents per share) a year earlier. Although it was a small increase and a penny under the average analyst estimate of 73 cents per share, sales were not as bad as some predicted.
Sales at outlets open for at least one year dipped 1 percent, excluding currency exchange effects. Some analysts were expecting sales to decline between 3 percent and 5 percent. David Schick, an analyst with Stifel Financial Corp, explained, “There were some fears among investors that the worldwide comparable sales number could be a lot worse. The numbers have shown some resilience in the brand,” according to Bloomberg.
Shares of Tiffany popped 6 percent on the news. Up until today, shares of the company had fallen almost 12 percent year-to-date. Best Buy, the big box electronics retailer, also surged more than 7 percent on renewed buyout hopes.
Best Buy and founder Richard Schulze announced the two have reached an agreement to allow Schulze to perform due diligence on the company. The WSJ reports, “The accord allows Mr. Schulze access to some due-diligence information as well as permission to form an investment group with private-equity sponsors to support his efforts to take over the company.” Under the deal, Schulze will also receive two board seats, as long as he does not make an offer directly to shareholders or violates other provisions.
The Minnesota-based company has been struggling for years as competition from Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT) and Apple (NASDAQ:AAPL) heats up. Shares of Best Buy have plunged more than 50 percent in the past three years. Investors looking to play the bounce should consider it more as a trade, rather than a long-term investment. There are still many uncertainties surrounding Best Buy. Tiffany may also look appealing, but caution should be used as the company also reduced its full-year per share earnings estimate to between $3.55 and $3.70, compared to the prior estimate between $3.70 and $3.80.
“We think it is only prudent to maintain a cautious near-term outlook about global economic conditions and the effects on customer spending, with year-over-year growth comparisons in the next few months also being pressured by the strong increases we experienced last year,” explained Michael Kowalski, chief executive of Tiffany.
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