Global net sales at Tiffany fell 3% to $1 billion as unrest in Hong Kong disrupted one of its strongest markets. In the Asia-Pacific region, sales fell 1% (a 3% rise when adjusted for currency), were flat in Japan and fell 4% both at home and in Europe.
Worldwide comparable sales fell 4%, according to a company press release. By region, not adjusted for currency: Comps in the Americas fell 4%, in Asia-Pacific fell 3%, in Japan fell 1% and in Europe fell 6%.
Net earnings dropped to $136.3 million from $144.7 million in the year-ago quarter, as gross profit fell to $658 million from $689 million a year ago.
Tiffany had already been pummeled by weakening spending by tourists, but mainland China has consistently served as a strong source of sales in recent quarters. That is now being undermined by what CEO Alessandro Bogliolo called "continuing business disruptions in Hong Kong."
That plus currency headwinds and tough year-ago comparisons were challenges in the quarter, he also said, but added "we are actively managing what is in our control and positioning our Brand to win — accelerating new product introductions and keeping a visible profile."
The tenuous position of the American middle class is also a likely factor, according to GlobalData Retail Managing Director Neil Saunders. "Domestic demand slipped modestly, mostly among middle income shoppers who are cutting back more on expensive, unnecessary purchases," he said in comments emailed to Retail Dive. "Tiffany has not been able to entice them with its various collections in the way it was doing last year."
Weaknesses on its home turf are worrisome enough to signal trouble at the holidays, Saunders warned, citing GlobalData research findings that jewelry sales are poised to suffer during the period due to "rising economic concerns and a prioritization of more practical gifts."
The company is successfully marketing to younger consumers, in light of the GlobalData finding that its brand awareness continues to rise among shoppers under 35. "However, conversion among this age band has been static over the past few months, meaning that Tiffany is not doing enough to activate this group," Saunders said.
The company is now also working to expand its customer base to men. While that may be wise, it's not a short-term play, he also said. "While the Tiffany brand is known to many men, it is not one that automatically resonates – mostly because the proposition is very focused on women," he said. "We are also cautious about execution and do not think this initiative will be an overnight success. Indeed, it will likely take a long time to change the perception of men and to get them actively shopping with the brand."
As Bogliolo suggests, there's little any brand, including the iconic jeweler, can do about the macro challenges. But "it is important that Tiffany holds its nerve," Saunders said.
"Many of the strategies the company has put in place to refresh the brand are directionally correct and are working," he said, adding that the company may need "greater innovation in ranges especially more modestly priced collections," and pumped-up marketing at the holidays. "However, neither of these things will entirely counteract a tougher external environment — it will only take the edge off the difficulties."