Tiffany & Co.’s worldwide sales dip

Tiffany and Co JapanUS jewellery retailer Tiffany & Co.’s first quarter worldwide net sales were lower than the previous corresponding period and reflected declines in all regions except Japan, attributed to a continuation of softness in spending by both local customers and foreign tourists.

In the Americas, total sales of $403 million were nine per cent below the prior year and comparable store sales declined 10 per cent. On a constant-exchange-rate basis total sales and comparable store sales declined eight per cent and nine per cent.

In the Asia-Pacific region, total sales of $238 million were eight per cent below the prior year and comparable store sales declined 15 per cent. On a constant-exchange-rate basis total sales and comparable store sales declined five per cent and 12 per cent; total sales growth in China and Korea was offset by a continued significant decline in Hong Kong and more moderate declines in other markets.

Net earnings were also lower than the prior year resulting from a decline in the operating margin, as improved gross margin was more than offset by a lack of sales leverage on operating expenses. However, net earnings were generally in line with management’s previously announced expectation for the first quarter.

“As expected, this was a difficult quarter in terms of both sales and earnings growth,” said Frederic Cumenal, company CEO.

“We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the US and Asia, particularly in Hong Kong. However, we are continuing to take actions that are intended to strengthen sales growth with local customers in the US and around the world,” said Cumenal.

Cumenal said from a strategic perspective, they believe their initiatives will enhance their ability to provide their customers with extraordinary products and experiences and ultimately contribute to improved financial results.

“We remain focused on generating sustainable long-term sales and earnings growth,” he added.

Neil Saunders, CEO of retail analysts firm Conlumino, said according to their data, over the past three years Tiffany has suffered from a decline in both the number of American consumers who consider it for jewellery purchases as well as the proportion who actually end up buying from it – despite overall interest in jewellery remaining strong.

“This dynamic is a particular problem in the jewellery sector, where the fact that customers buy infrequently gives Tiffany little opportunity to recapture ‘lost’ spending,” Saunders said.

He said the decline in customer share is evident among most shopper segments, including more affluent households. It is, he said, especially pronounced among affluent younger shoppers where the brand is seen as representing ‘old world luxury’.

“This is not a negative view, but equally it is not a positioning that chimes with the lifestyles and values of this cohort. Worryingly, this group will become an increasingly important constituent of the market as population demographics shift over time.”

“American views of Tiffany may not hold across the entire world, but here Tiffany faces a different set of challenges. A slight slowdown in Chinese consumption, as well as a more marked slowdown in mainland visitor numbers to Hong Kong, have harmed sales in the important Asia Pacific region. Meanwhile, in Europe, negative economic headwinds and lower consumer confidence have likely dissuaded some consumers from purchasing expensive jewelry,” said Saunders.

Saunders said the main issue is one of brand image and added that Tiffany needs to reconnect with consumers and make itself relevant.

“As much as this can be difficult in the slow moving jewellery sector, it is vital if the group is to reverse the slide in shopper numbers and in sales. Such a reconnection is not likely to yield an immediate uplift, so even if it starts to correct the problem now our view for the current year remains negative.”

Tiffany opened two company-operated stores in the first quarter (in Europe) and closed one location in Japan. By April 30 of this year, the company operates 308 stores; 124 in the Americas, 81 in Asia Pacific, 55 in Japan, 43 in Europe, and five in the UAE, compared with 298 stores a year ago.

Tiffany earlier announced it will open its first company-operated retail store in Auckland, New Zealand, this year.

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