NEW YORK – Tiffany & Co.’s revitalization efforts hit a snag in the third quarter as the luxury jeweler reported lower spending by tourists, sapping momentum ahead of the critical holiday period. The shares fell as much as 13 percent in pre-market trading.
Same-store sales rose 3 percent in the third quarter on a constant currency basis. That falls short of analysts’ average estimate for a gain of 5.6 percent.
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Net earnings were $94.9 million for the quarter, a 5.6 percent decline year over year from $100.2 million. Earnings per diluted share for the quarter was 78 cents, compared with 81 cents one year prior.
Net sales increased in that time from $976.2 million to $1 billion.
Key insights
Like other luxury companies, Tiffany is feeling the impact of Chinese tourists’ restraint. Sales growth was offset by “lower spending attributed to foreign tourists, primarily Chinese, in certain regions.” Tiffany cited “mixed results” in parts of Asia, including a decline in wholesale travel-retail sales in South Korea. That could heighten concern in the luxury industry about the health of Chinese spending amid reports of a customs crackdown on unauthorized imports. The jeweler enters the crucial holiday season in need of a boost. CEO Alessandro Bogliolo and head designer Reed Krakoff have sought to re-imagine the 181-year-old jeweler to appeal to younger shoppers, but the results may spark questions about their strategy. The company has ramped up marketing heading into the holidays. Selling, general and administrative expenses rose 15 percent in the quarter, though that’s below the previous period’s growth rate. Tiffany has brought on younger celebrities, such as Elle Fanning and Maddie Ziegler, to represent the brand in its advertising.
Market Reaction
Tiffany shares fell as much as 13 percent to $91.17 in early trading. The stock had soared to a high of $139.50 in July, propelled by the rebound in sales, before declining in the second half of the year as optimism fizzled in Wall Street. The stock has risen 1 percent this year through Tuesday’s close.
Kim Bhasin is a reporter for Bloomberg News.
