Tag: China

Tiffany Asia sales rose 9 per cent on the back of new store openings in 2016, with a solid fourth quarter balancing out a difficult year.

In the Asia-Pacific region, total sales of US$1 billion in the full year were approximately equal to the prior year and total sales of $284 million in the fourth quarter were 9 per cent up on 2015 as the company benefited from store network expansion.

Tiffany Asia opened four new stores last year and another in Japan, taking its network to 85 in Asia-Pacific and 55 in Japan. Globally, it opened 11 and closed five.

Same-store sales declined 9 per cent for the full year, but 2 per cent in the final quarter. On a constant-exchange-rate basis, total sales rose 1 per cent in the full year and 10 per cent in the fourth quarter, while comparable store sales declined 7 per cent and 1 per cent, respectively.

“During the year, management attributed performance in this region to increased purchasing by local customers and declines in spending by foreign tourists. In addition, there was strong retail sales growth in China, increased wholesale sales in Korea, a decelerating rate of retail sales decline in Hong Kong and varying performance in other countries,” Tiffany said in its results announcement.

In Japan, total sales rose 12 per cent to $604 million in the full year and 15 per cent to $185 million in the fourth quarter; comparable store sales increased 16 per cent and 19 per cent, respectively, while wholesale sales declined in both periods.

On a constant-exchange-rate basis, total sales in the full year were approximately equal to the prior year while total sales in the fourth quarter were 8 per cent above the prior year with comparable store sales growth of 5 per cent and 12 per cent, respectively, partly offset by a decline in wholesale sales. Management attributed sales growth in both periods to higher spending by local customers, with declines in spending by Chinese tourists.

Worldwide results

Worldwide quarterly net sales increased 1 per cent to $1.2 billion and same-store-sales were unchanged from the prior year. Net earnings were $158 million, compared with $163 million in the prior year.

For the full-year, sales reached $4 billion, down 3 per cent on 2015, reflecting a 5 per cent decline in same-store-sales. Performance was generally soft across all jewellery categories. On a constant-exchange-rate basis net sales and comparable store sales declined 3 per cent and 5 per cent respectively.

Net earnings were $446 million, compared with the prior year’s $464 million.

Chairman and interim CEO Michael J Kowalski said the company expects the macroeconomic and geopolitical challenges of the past year to continue in 2017.

“We strongly believe that Tiffany’s strategies are sound and that we have meaningful growth opportunities. Our management team is focused on accelerating the execution of our strategies to deliver extraordinary products, communications and experiences that will delight our customers around the world. Through strong leadership and this accelerated execution, we believe we are well-positioned to deliver attractive total shareholder return over the long-term,” he said.

Tiffany “failing to connect”

Analyst Neil Saunders, MD of GlobalData Retail, said while Tiffany sales in the final quarter were soft, they at least indicate the declines which have plagued the company for a long period are starting to level off.

But he maintains a lot of work lies ahead to reconnect with customers.

“Although the business is making some progress, that progress is patchy and does not indicate a company that is back to full health. Indeed, under the detail of the numbers it is clear that Tiffany still has issues in a number of regions, including the Americas and Europe.

“Part of the decline in the Americas is down to lower tourist spend which is impacting some flagship stores; that said, trend is now starting to dissipate and the effect on results is only slight compared to where it was at the start of the year. However, in the final quarter this was exacerbated by disruption at the Fifth Avenue flagship store which, due to its proximity to Trump Tower, saw customer traffic dip by around 14 per cent over November and December, and sales drop by 7 per cent in the final quarter. Given that this store usually contributes almost a tenth of company sales, it is reasonable to attribute some of the decline to this exceptional factor,” Saunders said.

“The troubles, however, run wider than flagships and tourists. Tiffany is a brand that is increasingly overlooked by American consumers, especially younger demographics. Just as was the case at the start of the year, Tiffany is still failing to connect with many shoppers segments and continues to lose ground to rivals.”

Saunders says jewellery has become a less-significant holiday purchase.

“Jewellery is no longer at the top of the Christmas list. For a brand like Tiffany, where lavish gifting is an important driver of buying, such a trend is distinctly unhelpful.”

Looking ahead, he says, it is clear Tiffany wants to re-establish its relevance and to project a much more distinctive image.

“The advertising during the Super Bowl, which highlighted Lady Gaga as the face of the brand, was a good start. However, it is not enough: it needs to be accompanied by a step change in products, store environments, and the general approach to selling. There is a need for a more fundamental and deeper shift in the brand’s direction.

“Fortunately, recent changes made to the management team, including the appointment of Reed Krakoff as chief artistic officer and the hiring of three new board members, should act as a catalyst for this change.”