Shares of Tiffany & Co. rose 2.6 percent Tuesday after the company said it is adding three new independent board members that include industry heavyweights Francesco Trapani and Roger Farah — and at least one analyst believes the stock could climb higher.
Tiffany’s stock on Tuesday closed at $88.40 in Big Board trading. Jefferies analyst Randal J. Konik believes the stock could climb to his price target of $102.00.
The company’s stock rose after activist investor Jana Partners won board seats at the struggling jeweler. The addition of the new board members was the result of an agreement between Tiffany and Jana Partners LLC and Trapani. Jana and Trapani together own 5.1 percent of Tiffany’s outstanding shares. Also named to the board was James Lillie. Further, Trapani will join the board’s nominating and corporate governance committee, as well as the search committee formed by the board to find a new chief executive officer for the company. The firm’s former chief executive officer Frederic Cumenal resigned on Feb. 5. All three newly named board members begin their service on March 6. The addition of the new board members increases the board to 13 members from 10.
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Konik, who has a “Buy” rating on the stock, said, “Tiffany has a strong positioning in a growing market. Catalysts include fashion jewelry improvement, tourism headwinds abating, flow-through of low input costs, growing brand loyalty and upward adjustment of multiple toward peers.”
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As for the new board members, the analyst said: “We are encouraged with the appointment of the independent directors given their backgrounds in the retail and consumer industry, and particularly the luxury sector for Mr. Farah and Mr. Trapani.”
According to Konik, the new leadership should be able to accelerate product newness and innovation, which would enhance brand demand and improve sales velocity. That in turn would drive expense leverage, higher margins and improve returns, the analyst said. “It’s a simple formula, but it all starts with the product,” Konik said. He also cited the choice of Lady Gaga as the new face of the HardWear product line showing the company’s “wherewithal to keep the Tiffany brand timeless but also fresh” and the choice of running a Super Bowl TV ad as another smart move since it was seen by 100 million plus people. Another plus cited was the hiring of Reed Krakoff as chief artistic officer given his background in shaping a brand through product.
As for other catalysts, Konik said tourism trends are stabilizing; Hong Kong and Macau trends are bottoming; the fashion jewelry business is turning, which means higher gross margins; easy pre-Brexit comparisons in the U.K.; low watch exposure, and product innovation ahead. He also noted that the Fifth Avenue store will have easy fourth-quarter comparisons next year due to President Trump’s traffic disruption this past quarter, as well as potentially lower personal income tax rates, which would bode well for luxury spending.