Tiffany (TIF) vs. Nike (NKE)–US multinationals in a strong dollar world

TIF and NKE are two iconic US retail names.  Both have large international exposure.  As a result, results of both have been dented by the fall in the US$ value of their foreign sales.

Both stock charts also look virtually identical   …until the euro started falling in mid-2104.  Since then, NKE has continued to motor ahead, while TIF has fallen by the wayside.  From last June until now, NKE is up about 35%, while TIF has fallen by around 15%.  The S&P 500 has risen by  7% over the same span.

Both reported overnight.  As I’m writing this, NKE is up strongly, in a market that’s up; TIF is down.

Yes, I know the two brands stand for much different things, the products are very different and the business structures are, too.

Still,  NKE shows that foreign currency exposure in a rising dollar world need not be lethal if the underlying business is growing fast enough.

I’ve also been thinking a lot lately about the possibility that relative currency values can’t continue to diverge at the current rate forever.  More important, at some point–far ahead of the facts–Wall Street will have fully discounted likely potential changes in currency values.  At that point, even though weak foreign currencies may still be carving a chunk out of corporate results the stocks will no longer react badly when the ugly earnings are announced.

To my mind, that’s when it will be safe to de-emphasize domestic-oriented firms and pick through bombed out multinationals.

We’re apparently not there yet.

But TIF may well be a good indicator to gauge when investors have fully played out their desire to sell foreign currency earners.




Leave a Reply