Tiffany & Co began in far-off Victorian days, when gold and silver were the basis of currency. It went public in 1987, just before the October stock market crash, and then continued selling its up-market jewelry through the recession of the early 1990s. Mark Aaron missed the Victorian era, but he did become IRO for the company just before its 1987 IPO. The vicissitudes he has seen in the market reflect Tiffany’s recent stock performance, which seems more akin to a dot-com with a high burn rate than a jeweler with a high sparkle. ‘There’ll always be volatility,’ he admits. ‘There’s a lot of noise out there and I want our company’s stock to appreciate in value over a long time based on our growth, not just because someone went on the financial networks and said something.’
Consumer confidence and investor confidence are marching to different drummers, it seems. Customers want to buy Tiffany goods, while shareholders want to sell Tiffany stock. Aaron is particularly exasperated since the market now penalizes good earnings results, assuming they’ll be hard to emulate. ‘We’ve had tough comparisons for years. We always do – that’s the sign of a high growth company. It just creates a lot more work for the IR person,’ he says with mock peevishness. ‘Our business is doing well and consumer confidence is at record levels but Wall Street is being very skittish. The retail business is particularly subject to psychological changes on Wall Street with fears of external events. My job is to communicate what our business is doing and what our strategies are, and to do a lot of hand-holding.’
‘It was even more frustrating in my early years in IR,’ he consoles himself. In one of those historically outstanding mismatches, Avon owned Tiffany during 1979-84. Aaron joined as manager of financial analysis in 1985 following a management buy-out intended to put the sparkle back in the company. As they approached the IPO in 1987, Aaron recalls, ‘The CFO said Hey, we’ll need someone to do IR! And so I volunteered.’ And why not? From his position he knew the company inside out, he liked communicating, and he was fascinated with Wall Street. ‘The fascination is still there,’ he asserts, although it’s clearly somewhat tempered by his experiences. He learned his role with the help of Niri, which he had immediately joined. ‘I needed to know how to write a press release. Where do I find these sell-side analysts? These buy-siders? I learned a lot and that’s why I like giving back to Niri. I was amazed at how Niri members were prepared to share information. Especially when everyone’s stock is in the doldrums, it’s a great organization for information and commiseration – very therapeutic.’ In fact, Aaron recently joined Niri’s national board. He needed all the sympathy he could get from colleagues in the early days. The IPO in May 1987 did well and so did the stock, though in October the market crashed and took Tiffany’s stock down with it. ‘Of course there were tremendous fears that people’s wealth had been wiped out and if so, what retailer would really get hammered?’ In fact, Aaron was almost as surprised as the analysts when Tiffany’s 1987 Christmas season turned out to be one of its best ever, with 20 percent sales growth. However, any jubilation was short-lived. When the real recession came in 1991, Aaron earned the IR equivalent of a Purple Heart medal. ‘Eight consecutive quarters of lower earnings,’ he grimaces at the memory. ‘It wasn’t a lot of fun reporting declining earnings quarter after quarter, however we decided to remain proactive and communicative. Just as we manage the business for the long term, we really have to communicate IR for the long term.’ No sooner had the US economy begun to move, than Japan sailed into the doldrums. ‘It was pretty dramatic. One Friday afternoon, we got the information about how much business had dropped in Japan, and I had to cancel my vacation planned for the following week so we could issue a press release.’
The charge
Once again the IR recipe was communication and availability. The following year the company explained its intention to deal directly with Japan instead of going through a wholesaler. ‘We bit the bullet, realigned the business and took the charge, and I told the Street, Here’s the list of initiatives we’re going to take to improve our business, and we hope you’ll give us a couple of years to turn things around.’ Inspired by Tiffany’s history of candor, Wall Street agreed, and its faith was repaid in 18 months when Tiffany turned its Asian earnings around. ‘Japan’s economy has been soft for seven or eight years now, but we’ve had five consecutive years of double digit comparable stores sales growth,’ he comments. However, while Aaron produces all these historical examples, analysts still think a wobbly Wall Street translates immediately into a crash dive for retailers. Aaron admits, ‘Obviously Tiffany has benefited in some degree from the bull market, but we’re going to take most of the credit for our own performance because we have a really strong product development and expansion program. That’s worked really well in good and mediocre times. Our business is heavily occasion-related and engagements and weddings don’t go down just because of the economy or the stock market.’ Last year, following the conventional wisdom that retailers without an e- in their names were without a future, Tiffany opened its e-commerce division so browsers could order their tiaras on line. ‘Investors reacted favorably, although the e-commerce mania – or euphoria – of last year, certainly has cooled. Then, every meeting started with everyone wanting to talk about how well Tiffany, with its powerful brand name, was suited for e-commerce.’ ‘Over time we can develop it as a niche business. But our main business is running retail stores. That’s what drives this business, and that’s what we should be talking about.’ With that in mind, Tiffany opened a store in Paris last year, taking the high-end retail battle to foreign ground. ‘We didn’t do it for the Street but it played very well with them. It’s doing very well – and it gives me a chance to go to Paris more often,’ he admits with the kind of candor that characterizes his IR. At least in Europe sell-side analysts have a more refined idea of the luxury retail sector than in the US where, to Aaron’s obvious discomfort, it often gets lumped in with mass retailers. ‘When we went public, the bankers compared us with Wal-Mart and other high growth retailers. Technically we’re pretty unique, but they needed to do their comparisons,’ he says. ‘At the end of the day I just want people to take the time to really understand what the company is truly about.’ The company has 23 analysts following it – certainly more than its market cap of around $5 bn would otherwise suggest. ‘Part of the reason is that they want to follow a dynamic company with enormous growth prospects; some because we’re a jeweler, some because we’re a specialty retailer, some because we’re increasingly a consumer brand and for some, a luxury brand.’
No free samples
It’s certainly not because they get free samples. In fact, Tiffany offers no product discounts even to retail investors – but they do get a catalog in the mail with their financials. One would have expected that Tiffany customers would certainly have the resources to buy the stock, and he admits, ‘We’ve tried to measure, and we believe a substantial number of our holders are customers.’ However he adds, ‘We wouldn’t do direct marketing to our customers to persuade them to buy stock – our customers are well educated, sophisticated and astute. They know that Tiffany is a public company and if they’re interested in buying stock they know how.’ Since he foregoes customer targeting, he concentrates on the institutions. ‘I do my own [targeting] by looking at the institutions. I find one that holds five other specialty growth retailers, and not us, and I call. It’s not overly scientific, but it seems to work.’ Using the Carson Group, he closely tracks the institutional investors that make up 80 percent of Tiffany’s holders. ‘When I was learning the ropes, I presumed IR meant relating to investors, so as soon as I could identify who they were, I called them. I received a lot of very surprised but favorable feedback from the investors I called.’ He doesn’t mind them using sell-side research, but he wants to talk to potential shareholders himself. Of course some, ‘the indexers, chartists or whatever, don’t want to talk, but nine out of ten of the rest are very pleased.’ And he is pleased as well. ‘We’ve cultivated a really solid group of investors, most of them with a growth orientation, which is what I want. We are happy with our shareholders generally. Some of our largest investors are just holding. With such a large sell-side following, the big problem is rationing conference participation. We try to go to Europe at least once a year to get the message out, and then there are the usual US venues: Boston, Chicago, Minneapolis, Denver and California. Nothing replaces getting out there and having face to face meetings.’ He admits that being based in New York is a little like having a stationary roadshow since ‘a huge number of investors come here from all over the world. It’s a very effective use of my time.’ It is a measure of Aaron’s reputation that he does most meetings himself, without the usual status-conscious analyst demands for meetings with senior executives. ‘Of course, if someone has a real desire and it’s a good use of everyone’s time, I’ll set up a meeting with the chairman, CFO, or head of merchandising, but my job is to free up their time so they can run the business.’
Analysts’ praise
Analysts certainly report no dissatisfaction with the information flow. Aaron sits with his secretary on the same smallish floor with Tiffany’s top management team, and although he officially reports to CFO Jim Fernandez, ‘This is an entrepreneurial organization, so I interact a lot with Mike Kowalski, our CEO, and Bill Chaney, the chairman. We have very open communications, so I can stay informed in real time – we even get daily sales reports from all around the world.’ That also facilitates his communication inward. ‘I know some IROs are a little shy of that, but I hear a lot of things on Wall Street and if I hear something meaningful and relevant about us or our competitors, I don’t hesitate to share it with the people here.’ However, he also cultivates some detachment. ‘When the stock goes down, I don’t take it too personally, although I used to, while at the same time not taking too much credit for the market rising. And some IR colleagues warned me, You’d better take the credit on the way up because you’ll surely be blamed on the way down!’ So far, even with the stock market’s rollercoaster summer, analysts are not blaming Mark Aaron.
What the analysts say
Harry Ikenson, Chase H&A
‘Mark Aaron is a very straightforward, quality professional. If every company had someone that did their IR the way he does, analysis would be much easier. He communicates very effectively and he keeps us updated on retail trends. The company does not give monthly sales reports, but if we ask intelligent questions, then he will give us intelligent answers.
I’m sure it has not been as much fun this year as it was when the stock was on an up-turn. He’s been in situations when business was not as good as it is now, but he kept us all abreast and did not hide. When things are not going as well as expected, he communicates that effectively as well.’
Debby Lakner, CIBC
‘Mark Aaron doesn’t sit around waiting for news to talk to investors and analysts. He has ongoing dialog with them that doesn’t only happen when there’s news of note.
‘I’ve been following the company since the late 1980s and, believe me, he has had plenty of periods when the news was not so good! But that’s also the key to good IR, being able to continue the dialog with investors even when the results are not particularly good.’
Amy Ryan, Prudential
Mark Aaron is a class act and a pleasure to work with. He understands Tiffany’s business and is able to articulate its strategies extremely effectively. Tiffany the company is different from Tiffany the stock. The company is a stable and profitable business, but the stock is vulnerable to the whims of the macro-economic environment. Aaron does a terrific job: he’s been through the ups and downs and can articulate what happened to Tiffany in different market conditions.’
Mark Friedman, Merrill Lynch
‘He is very good at investor relations. He has very strong understanding of how to carefully balance the business and the stock in the minds of investors. Despite the stock’s ups and downs, he continues to help investors and analysts walk through every step of Tiffany’s long-term strategy.’
