Brief

Tiffany regains a little sparkle with surprising Q4 rebound

Dive Brief:

  • Upscale jeweler Tiffany & Co. on Friday reported fourth quarter earnings of $1.45 per diluted share on $1.23 billion in revenue, a 1% net sales rise (2% on a constant-currency basis) — down from $187 million or $1.46 per diluted share in the prior year, but besting the $1.37 per share in earnings and $1.22 billion in revenue expected by analysts. Total same-store sales were unchanged vs. year-ago totals, eclipsing analyst expectations of a 1.1% decline.

  • For the full year, Tiffany's worldwide net sales of $4 billion fell 3%, reflecting a 5% decline in same-store store sales due to soft performance in all jewelry categories. On a constant currency basis, worldwide net sales fell 3% and same-store sales fell 5%.

  • Tiffany said it expects worldwide 2017 net sales to increase by a low-single-digit percentage and by a mid-single-digit percentage on a constant-currency basis, based on worldwide gross retail square footage increasing 3% net through 11 store openings, nine relocations and six closings.

Dive Insight:

After several quarters of struggling sales impacted by the strong dollar, its flagship’s proximity to increased security and protests at Trump Tower and other headwinds, Tiffany is seeing its performance stabilize somewhat just a few weeks after the departure of Frederic Cumenal, who stepped down as chief executive officer.

“Despite macroeconomic and geopolitical challenges in the past year that we believe will continue in 2017, we strongly believe that Tiffany’s strategies are sound and that we have meaningful growth opportunities,” said Tiffany Chairman of the Board Michael J. Kowalski, who ceded the CEO post to Cumenal in 2014 and is serving as interim CEO while the company searches for a successor.

But currency swings and its flagship’s unfortunate location aren’t Tiffany's biggest problems, says GlobalData Retail managing director Neil Saunders.

“Tiffany is a brand that is increasingly overlooked by American consumers, especially younger demographics,” Saunders said in a note emailed to Retail Dive. “Just as was the case at the start of the year, Tiffany is still failing to connect with many shoppers segments and continues to lose ground to rivals. Although the business is making some progress, it is fair to say that that progress is patchy and does not indicate a company that is back to full health. Indeed, under the detail of the numbers it is clear that Tiffany still has issues in a number of regions, including the Americas and Europe. In the fourth quarter, sales for the former fell by 3%, and sales for the latter slipped by 7%.”

Tiffany's failure to catch the attention of younger consumers is particularly acute at the holidays, which was once an especially key time for purchases of the upscale jewelry that is the brand's specialty. But since the Great Recession, higher spending shoppers haven’t been buying those sparkly things as gifts nearly as much as they once did, noted Saunders. “Jewelry is no longer at the top of the Christmas list,” he said. “For a brand like Tiffany, where lavish gifting is an important driver of buying, such a trend is distinctly unhelpful.”

For that reason, Tiffany must continue to be assertive in its marketing and merchandising efforts. Saunders said that the company’s management shakeup and hiring Reed Krakoff to the newly created role of chief artistic officer will help. 

The advertising during the Super Bowl, which highlighted Lady Gaga as the face of the brand, was a good start,” Saunders said of Tiffany’s effortx to reestablish its relevance and to project a more distinctive image. “However, in our view, it is not enough: It needs to be accompanied by a step change in products, store environments, and the general approach to selling. There is a need for a more fundamental and deeper shift in the brand’s direction. Fortunately, recent changes made to the management team, including the appointment of [Krakoff] and the hiring of three new board members, should act as a catalyst for this change.”

Follow on Twitter

Filed Under: Corporate News