Recovering Tiffany Sales a Lure to Others After LVMH Retreat

Tiffany & Co. may be left all by itself, and that’s probably just fine.

Now that the worst of its 2020 crisis is behind it, Tiffany is inching toward growth once more, making it an attractive target for other potential suitors if LVMH successfully pulls out of its deal to buy the U.S. jeweler. But Tiffany may opt to go it alone instead, building on a turnaround plan that’s gotten it this far without a parent or partner.

“Tiffany is quite a solid company on its own with relatively low debt levels and the possibility to both weather the crisis and finance its growth,” said Jelena Sokolova, an analyst at Morningstar. “It is also one of the few established global luxury jewelry names.”

Although the jeweler slogged through several months of dismal sales amid the pandemic, forcing it into survival mode with stores on lockdown and shoppers diverting cash away from luxury items, it’s seeing glimmers of a recovery. In August, just before LVMH declared its intentions to back away, Tiffany’s global sales turned positive again. Now it expects higher earnings in the fourth quarter than last year as shoppers reallocate cash they’d normally spend on trips and restaurants.

The same strengths that tantalized LVMH enough to offer $16 billion to buy Tiffany prior to the coronavirus pandemic have retained much of their luster. Tiffany realigned itself to appeal to younger shoppers and invested in e-commerce and Asia. Last holiday season, the business had double-digit growth in Mainland China, and it pegged the region as a major growth engine even as tourism slowed elsewhere. In the latest quarter, Asia was again a hot spot for the jeweler.

Recovering Tiffany Sales a Lure to Others After LVMH Retreat

“The fundamental strength of Tiffany’s business is clear,” Chief Executive Officer Alessandro Bogliolo said in a statement as the company announced it would sue LVMH to get the deal done.

Without the deal, Tiffany’s operations would likely be fine -- but it would probably take a share-price hit. An analyst at Mizuho Financial Group Inc. estimated that Tiffany’s shares could fall to $89.32 without the LVMH deal, 27% below Tuesday’s close.

Still, if the acquisition by Louis Vuitton-owner LVMH is abandoned, Tiffany will probably have other options if it wants a partner -- though any new deal would likely have to wait until the luxury goods industry revives further. LVMH’s rivals Kering SA and Richemont SA could pop up as potential buyers, Francesca DiPasquantonio, an analyst at Deutsche Bank, wrote in a note to clients.

“Tiffany is a strong brand and would be an appealing acquisition target,” she said.

Representatives for Richemont and Kering declined to comment.

Morningstar’s Sokolova agrees Tiffany could see other offers, as jewelry is a promising category with higher growth than the overall luxury space.

“In that sense,” she said, “Tiffany looks like an attractive target.”

©2020 Bloomberg L.P.

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