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The Day Ahead: Go Scream at a Fellow Investor

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) 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.

At the time of publication, Sozzi had no positions in the stocks mentioned, although positions may change at any time.

Brian Sozzi is Chief Equities Analyst for NBG Productions. In this capacity, he is responsible for developing independent financial content and actionable stock recommendations (including ratings and price targets) for an institutional and retail investor base. In addition, Sozzi is the Editor in Chief of the "Decoding Wall St." investor education online platform.

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