August employment report: It pains me to say, but if you want to see stocks regain their mojo, you have to root for a disappointing August employment report. I believe there is a distinct possibility here, given key aspects of various manufacturing reports and numerous signs of increased caution on hiring by Corporate America. A lame jobs report will reignite the potential for swift Federal Reserve action at its next meeting, which would temper the concerns about the no-action possibility that has emerged in the past two weeks.
That summarizes my thoughts as they pertain to an attack plan. Oh, before I forget, chill on taking seriously any Tiffany (TIF - Get Report) buy ratings for at least a year. The share pop has now unduly raised investor hope, and you should not have chased Monday, or ponder doing so Tuesday. Here is why.
- Tiffany's Americas segment had its first negative same-store sales resLIt since the fiscal third quarter of 2009. (Yes, that would be during the "Great Recession.")
- It's apparent that a resistance to tempering new store opening plans globally is raising the hurdle rate for leverage -- that is, it's driving operating-margin expansion.
- Same-store sales at the New York flagship and branch stores declined at a faster rate relative to the first quarter. Although the tourist travel and spending issue is top of mind amongst investors, branch-store sluggishness deserves more attention -- regarding financial industry considerations, for example. Moreover, when opting for a discretionary purchase, an aspirational customer is reaching for a pair of shoes or a Michael Kors (KORS) handbag.
- The fiscal 2012 earnings-per-share range dropped for the second time this year due to more caution around operating margin. It makes one wonder about third-quarter trends to date.
- If Tiffany is having a volume problem, that is exposing a rising cost base -- price increases are the norm.
- Inventories weren't exactly in line to guidance provided on the fiscal first-quarter earnings call, and likely were elevated as demand again surprised negatively.
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