The Swiss Watch Exports numbers are the best indicator that we can find to gauge the global demand for luxury items - particularly jewelry. Of course watches have their very own demand constraints and TIF is underexposed to the category -- but the iWatch, FitBit, and other connected fitness wrist wear we'd argue don't compete with items priced above $3,000, which oh by the way was down 19.5% for the month.
Here's what we think it means for TIF:
Looking at the trend in TIF comp sales vs. the global Swiss Watch exports numbers paints a pretty tight correlation between the two metrics, with the two most recent Swiss Watch export numbers showing a sequential deceleration in the YY trend. The only problem is that TIF Consensus estimates currently expect a reacceleration in comp trends sequentially on a 1yr and 2yr basis for 2Q16 and the balance of the year. With a positive comp bogey embedded in numbers for 4Q. We think that's a pipe dream.
All in, we think TIF takes numbers down again which will mark the eighth time in two years that the company readjusted guidance to the downside. We're at $3.23 in 2017 vs. the street at $3.92. And we think the TIF story from here is much more tied into weak consumer demand for the core product offering with a FX/tourism kicker. So what's a company putting up the worst comp numbers in retail (ex-Lumber Liquidators) worth? Because it's TIF, we'll give it a little bit of a luxury buffer - so low teens P/E multiple gets us to a $42 dollar stock on 2017 numbers. That's 30% downside from here.