Slowdown in the US economy
According to OPEC economic outlook 2007, the US real GDP growth could fall from an estimated
3.4% in 2006 to 2.4% in 2007. A slowdown in the US economy would depress the purchasing power
of the retail customers, which in turn will depress revenue growth and reduce margins of Tiffany.
The US economy is likely to slowdown in the short to medium term owing to rising inflation and
interest rates. The US has seen 17 successive interest rate hikes over the past few years leading
to the current high of 5.25%. Rising interest rates are already beginning to depress consumer
spending, as the percentage of disposable income that US households pay out to service mortgage
and consumer debt is increasing. This reduction in consumer spending does not augur well for retail
chains like Tiffany. Slowdown in the US, the key market for Tiffany, will put pressure on the revenues
of the company