NEW YORK –Tiffany & Co. reported first-quarter sales that fell short of projections, while warning that tariffs will rise on the jewelry it sends to China from the U.S. Shares fell in early trading.
Comparable sales, a key retail metric, fell 2% worldwide on a constant currency basis, missing the average of analysts’ estimates for 1.2% drop from Consensus Metrix. The company’s gross margin also shrank and also fell short of estimates.
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Total quarterly sales declined $30.1 million year over year to $1 billion. Profit for the quarter was $125.2 million, a 12% decline year over year.
Key Insights
Growing tensions between the United States and China have taken a toll on the jewelry maker. Over the holidays, Tiffany said it was hurt by a drop in spending by Chinese tourists, an important customer group. The company warned that this situation has persisted, with “dramatically lower worldwide spending attributed to foreign tourists.” This situation could be exacerbated going forward by a warning that China issued on Tuesday about travel in the U.S. The country’s Ministry of Culture and Tourism cited recent “frequent” shootings, robbery and theft in the U.S., according to Xinhua News Agency. That’s likely to further reduce Chinese travel abroad – and the purchases they make there. Sales to local customers improved however, led by China, according to CEO Alessandro Bogliolo, who predicted Tiffany “is positioned for improving trends in the second half of 2019.” While Asia was a bright spot, with flat same-store sales there outpacing estimates for a drop, most other region performed worse than expected. In the Americas, a comparable sales decline of 4% was almost almost twice as big as estimated. The company sees earnings coming under pressure in the second half, in part because of tariffs rising to 25% on the jewelry the company sends to China from the U.S. The company has also quietly gone on a hiring spree in the past two years, and is increasing its retail square footage and relocating 15 stores.
Market reaction
Tiffany shares fell 2.7% to $88.49 in pre-market trading, paring a steeper earlier decline.
Kim Bhasin is a reporter for Bloomberg News.
