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Tiffany (TIF) Stock Falls as Deal With LVMH Looks Uncertain

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Tiffany & Co.’s shares nosedived roughly 9% on Jun 2 on reports stating that the $16.2-billion takeover deal with a French luxury goods group LVMH is now losing sheen, per the fashion journal WWD. Reports claimed that the deal could fall through on grounds of U.S. economic fallout from COVID-19 and the ongoing social unrest connected with George Floyd’s death. Apart from these perils, the luxury goods giant is concerned about the jewelry retailer Tiffany’s ability to meet its entire debt covenants at the close of the aforesaid transaction, which was initially anticipated to close in mid-2020. Per sources, Louis Vuitton owner LVMH declined to comment.

The Tiffany-LVMH deal dates back to November 2019, when the latter had agreed to buy the former for $135 per share or $16.2 billion in cash. Industry experts believe that the deal will add sheen to LVMH’s jewelry and watch segments, while enabling Tiffany to become part of growing luxury portfolio including Bulgari, Christian Dior, Dom Perignon, Fendi, Sephora and Guerlain. Tiffany, which operates more than 300 stores worldwide, is also likely to gain from LVMH’s prominent presence in European and Asian markets.

The global pandemic, which has claimed more than 1 lakh lives in America, has disrupted the global economy and rattled stock markets. This has also derailed a vast number of companies’ business operations, leaving them with increased debt. Likewise, Tiffany is marred by coronavirus impacts that forced it to either temporarily shut or limit operating hours of certain stores. This, in fact, largely dented the company’s operations in the Chinese Mainland region. In addition, Tiffany’s gross margin has been under pressure for a while. Also, soft sales in Japan and disruptions in Hong Kong are deterrents.


Over the past three months, shares of the New York-based jewelry designer have lost 12.5%, wider than the industry’s 3.5% decrease.

Nevertheless, this Zacks Rank #3 (Hold) company has been closely working on strategic initiatives. Tiffany remains focused on evolving its brand, enhancing omni-channel experience, solidifying position in core markets, increasing operating model efficiency and enriching overall organization. Let’s see whether these efforts help the company sail through the tough times.

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