Tiffany on Wednesday reported that first quarter worldwide net sales rose 15% to $1 billion as comparable sales rose 10%, with strong sales growth in all jewelry categories. On a currency-neutral basis, worldwide net sales rose 11% and comparable sales rose 7%, the company said in a press release. Other net sales fell 21% to $22 million primarily due to a reduction in wholesale sales of diamonds, the company said.
Profits in the quarter rose 53% to $142 million from last year’s $93 million. Based on the strong and better-than-expected results, management boosted its outlook for the full year, now expecting worldwide net sales to rise by a high-single-digit percentage, both as reported and currency neutral, and net earnings to rise to between $4.50-$4.70 per diluted share.
By region: Total net sales in the Americas rose 9% to $425 million and comparable sales rose 9%. In Asia-Pacific, total net sales rose 28% to $329 million due to retail sales increases in Greater China and most other markets and wholesale increases in Korea, and comparable sales rose 14%. In Japan, total net sales rose 17% to $151 million and comparable sales rose 14%. And in Europe, total net sales rose 13% to $107 million and comparable sales rose 2%.
Tiffany is enjoying some favorable conditions well out of its control, including a weak dollar that is boosting travel and healthy sales to wealthy tourists, abroad and at home. But the iconic retailer has taken major steps to upgrade operations and most importantly, its jewelry designs, and that stoked an unexpected level of growth in the first quarter.
It's been a tough few years. Over a year ago, after a series of sales declines, the jeweler tapped Reed Krakoff to the newly created role of chief artistic officer. His team is now out with the company’s new Paper Flowers release, which is resonating with younger consumers and helping update Tiffany’s image. Research from GlobalData shows that Tiffany is gaining ground in awareness and appeal to millennial shoppers, without crucially harming its image with older aficionados.
"Tiffany's focus on producing more innovative and contemporary collections has paid dividends in both stimulating consumer interest and driving sales," GlobalData Retail Managing Director Neil Saunders told Retail Dive in an email. "New ranges like Paper Flowers show that the company is full of ideas and that it will continue to launch new collections throughout the year. This approach means that the company is once again treating jewelry as an item of fashion and is putting itself at the forefront of trends and modern design. In our view, this is the breath of fresh air that will clear away Tiffany's traditionally fusty image."
The company is also moving more assertively to sell online, including a partnership with Farfetch launched two weeks ago in more than 40 countries, along with its ongoing relationship with the Net-A-Porter.
"We believe this will bring Tiffany & Co closer to additional customers who are highly fashion conscious and shop online in and beyond the 13 countries where we operate our own Tiffany e-commerce sites," CEO Alessandro Bogliolo told analysts on a conference call on Wednesday, according to a transcript with Seeking Alpha.
And the company is reining in costs, though that will eventually have its limits and shouldn't be expected to continue through the rest of the year, he said. "Nevertheless, we are committed to increasing efficiency."
The fashion and assortment updates — the jeweler is also expanding its more affordable ranges to some extent — haven’t reached many stores, which Saunders said remain immersed in the outdated atmosphere of the old Tiffany. But there is time to work on that and the company’s website is, by contrast, "easy, engaging and interesting to shop," Saunders said. "The company feels more energetic and younger than it has for a long time, and that can only be a good thing."