Tiffany’s (TIF) Q3 results looked mixed, especially considering the levels its stock is trading at. Despite the 3% increase in sales, it’s never good to see comparable store sales declining, although the 1% decline in comps is still a sequential improvement from the 2% decline in Q2. Anyway, the market doesn’t like companies with falling comps, and investors are very afraid of the detrimental effect that lower sales per stores have on margins, considering the fixed costs ("negative operating leverage"). Similarly to what happened to Signet Jewelers (SIG), Tiffany wasn’t able to take advantage of the improving environment in retail and failed to turn total comps into positive territory. That’s not because the business is not showing improvements in North America, but because the 1% increase in comps in the Americas region was largely offset by weakness in other parts of the world, such as Japan and Europe. While in the previous quarter Japan and Europe reported comps up 9% and flat, respectively, they reported a significant contraction in Q3, with an 8% and 3% decline, respectively. While Japan surely faces the difficult comparison with Q3 2016, when comps rose 20%, we can’t say the same for Europe, which reported a 14% decline in Q3 2016. I'm very disappointed by the performance in Europe and, in general, I see that Tiffany’s results show high volatility across regions and not a clear path toward a clear improvement. Look at comps variation per region in the past five quarters:
