Activist investors Nelson Peltz and Richard Breeden continue to mine greater stakes in jewelry retailers despite weak consumer spending and soaring gold prices.
Peltz’s fund on Wednesday hiked its stake in Tiffany & Co. to 7.9 percent, while Breeden on Tuesday raised his stake in Zale Corp. to 17.66 percent. Peltz has spent 11 months trying to goad Tiffany to improve its margins and address operational and strategic issues.
Breeden, meanwhile, signaled in September that he believed Zale’s shares were undervalued and that he may try to initiate a major transaction at the company. Last year, Zale sold its higher-end jewelry chain Bailey Banks & Biddle and has been working to streamline its business to increase shopping-mall based sales.
Despite a slowdown in consumer spending, Tiffany executives said on Tuesday the company had no plans to slow its store-expansion rate. Tiffany, whose products range from under $100 to over $50,000 a piece, said it would be just fine even if the United States slid into a recession.
Tiffany’s confidence comes as Goldman Sachs on Wednesday raised its 2008 gold price forecast, factoring in an expected U.S. recession in the second and third quarters of the year that could lead to a weaker U.S. dollar. Goldman predicted that gold would reach $915 per ounce in 2008. Gold topped $900 an ounce for the first time ever last week.
Plus, last week, Tiffany cut its outlook for the year ending on January 31. Yet, Peltz and Breeden obviously see potential in these jewelers.
Shares of Tiffany jumped $1.60, or 4.5 percent, to $37.26 on Wednesday amid news that Peltz’s fund raised its stake. Peltz declined to comment. Shares of Tiffany have fallen about 5.5 percent over the past year.
Shares of Zale jumped $1.65, or 12.9 percent, on Wednesday. Zale’s stock, however, has plunged 48 percent over the past year.
Tiffany and Zale could not be immediately reached for comment.
Source: reuters
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