Double-digit sales growth for Tiffany in China provided some encouragement for the US jewelry retailer in what was otherwise an unremarkable half.
And despite the brand’s strength on the mainland, Tiffany’s CEO Alessandro Bogliolo expressed concerns about the second half, referencing the ongoing social disruption in Hong Kong.
“As with the first quarter, we are encouraged in the second quarter by sales growth attributed to our local customer base globally, which was again led by double-digit growth in Mainland China,” he said, noting sales to tourists were softer.
“With the tough comparison to last year’s strong performance in the first half behind us, and in spite of the headwinds of weak demand from foreign tourists, currency exchange rate pressures and continuing business disruptions in Hong Kong, we are actively managing what is in our control and positioning our brand to win – accelerating new product introductions and keeping a visible profile.”
Across Asia-Pacific, total net sales decreased 1 per cent in both the second quarter and the first half, to US$298 million and $622 million, respectively, which included comparable sales declines of 3 per cent in the second quarter and 4 per cent in the first half, balanced by the opening of new stores and increased wholesale sales. The declines were largely due to currency changes.
Sales performance throughout the first half reflected strong growth by Tiffany in China, softness in Hong Kong and mixed performance in other markets in the region.
In Japan, total net sales of $155 million were unchanged in the second quarter and decreased 2 percent to $300 million in the first half, and comparable sales decreased 1 percent and 2 percent, respectively. On a constant-exchange-rate basis, sales decreased 1 percent in both quarters, while comparable sales decreased 3 percent and 2 percent, respectively.
Neil Saunders, MD of GlobalData Retail, said that after taking into account the strong prior-year numbers the Tiffany results reflected a marked deterioration from the type of growth being achieved several quarters ago.
“Domestic (US) demand slipped modestly, mostly among middle-income shoppers who are cutting back more on expensive, unnecessary purchases. Tiffany has not been able to entice them with its various collections in the way it was doing last year.”
However, he said GlobalData’s research showed that while marketing efforts are not necessarily driving sales, the company is improving traction with younger shoppers.
“From our data, brand awareness is still rising among the under 35 cohort; 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 planned launch of a range focused on male customers provides a strong an opportunity for Tiffany, but warned it will take time before it resonates, mostly because the retailer’s overall offer remains very focused on women and men know the brand through shopping for women.
“We do not think this initiative will be an overnight success. It will likely take a long time to change the perception of men and to get them actively shopping with the brand.”
He concluded that while Tiffany’s sales were not yet reflecting the efforts being invested in improving the brand, it was important that the company “holds its nerve”.
“Many of the strategies the company has put in place to refresh the brand are directionally correct and are working. There is a case for greater innovation in ranges, especially more modestly priced collections, as well as some elevated marketing over the holiday period. However, neither of these things will entirely counteract a tougher external environment – it will only take the edge off the difficulties.”
