FILE PHOTO: A Tiffany & Co logo is seen outside the store on 5th Ave in New York, New York, U.S., March 19, 2019. REUTERS/Carlo Allegri
August 28, 2019
(Reuters) – Luxury jeweler Tiffany & Co <TIF.N> said on Wednesday declines in tourist spending in the United States dragged on sales, but it reported quarterly earnings that beat estimates on increased spending by local customers in mainland China and a cut-back on marketing costs.
A protracted U.S-China trade war, strong dollar and a stricter U.S. visa approval process have contributed to a near 3% drop in Chinese citizens arriving in the United States this year, pressuring American retailers that are reliant on the high-spending tourists.
The company’s quarterly same-store sales, excluding the effects of currency exchange rates, fell 3%. Analysts had expected a 1.3% decrease, according to IBES data from Refinitiv.
Tiffany’s shares were up 1.4% at $89.73 in early trading.
Chief Executive Alessandro Bogliolo tried to reassure investors that while spending outside of China was down and currency headwinds and business disruptions in Hong Kong would have an impact on new product launches, sales in mainland China were robust.
The company also said it would stick to its full-year sales forecast.
New York-based Tiffany said expenses fell 5% in the quarter, but that it expects to spend more on marketing in the second half of the year to entice younger shoppers into its stores and continues to renovate its flagship shop in Manhattan. Last quarter, the retailer suspended much of its digital marketing as it revamped its websites.
The jeweler has also refreshed its collections with more affordable items such as pendants and earrings to appeal to millennials who have been gravitating to lower-priced competitors such as Denmark’s Pandora A/S <PNDORA.CO> and Signet Jewelers <SIG.N>.
“Despite ongoing macro roadblocks, Tiffany is regionally diversified and the underlying health of the brand remains strong, as seen by sales growth by the company’s local consumer base,” said CFRA Research analyst Camilla Yanushevsky.
The company reported “strong growth” in mainland China but “softness” in Hong Kong and “mixed performance in other markets in the region. Sales decreased in the Americas, Europe and Japan, it said.
Tiffany’s net earnings fell to $136.3 million, or $1.12 per share, in its fiscal second quarter, ended July 31, from $144.7 million, or $1.17 per share, a year earlier.
Analysts had expected earnings of $1.04 per share.
Tiffany maintained its annual sales forecast of a low-single-digit percentage rise.
Net sales fell to $1.05 billion from $1.08 billion, missing Wall Street estimates of $1.06 billion.
Tiffany’s shares have fallen nearly 12% this month on U.S. President Donald Trump’s threats to ratchet up a trade war with Beijing.
(Reporting by Uday Sampath in Bengaluru and Melissa Fares in New York; Editing by Shounak Dasgupta and Steve Orlofsky)
