Tiffany may regain its lost luster

Tiffany & Co. (TIF) is in Wall Street's doghouse because it has slashed its annual profit outlook three times this year as high diamond prices and Superstorm Sandy affected its performance.  The company may not linger there for long.

For one thing, diamond prices are expected to remain flat in 2013, though they are still going to be higher than levels seen from 2006 to 2010, according to an analysis by KPMG. Tiffany also is being hurt by the massive layoffs on Wall Street, particularly at its flagship store in New York City. Masters of the Universe will start to buy $185 key chains again when business starts to pick up again, which should start to happen next year.

Though it's tempting to blame Tiffany's woes on the fiscal cliff, there isn't any evidence that it's having a major impact on consumer behavior. Indeed, a survey released by Unity Marketing found that more than half of all affluent consumers said they were better off financially than they were 12 months ago. Bain & Co. expects global sales of luxury goods to increase 7% to 9% through the middle of the next decade. 

The market is showing areas of strength, though it has not rebounded to pre-Recession levels. Sales of luxury automobiles are growing this year, though not at the rate that some had originally forecast because of rising demand in emerging markets, among other reasons.  Harley-Davidson (HOG), which recently reported better-than-expected​ quarterly earnings, expects to ship 240,000 to 250,000 motorcycles this year, an increase of between 5% and 7% year over year. But the best evidence for the resiliency of the wealthy consumer is probably the market for contemporary art.

A recent Sotheby's auction took in more than $375 million, "the best auction result in any category in the Company’s history," according to the auction house. It has taken in more than $1 billion in sales this year in this category. The attraction to these works is understandable.
"It's the most liquid of all the art sectors," said Jeff Rabin, a principal at Artvest, which advises clients on investing in the art market, in an interview. "It's a global market. You can sell it anywhere."

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter@jdberr
 

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