Tiffany's Crashes As Growth Slows Due To Stingy Chinese Tourists

In the latest confirmation that the global aspirational consumer has hit a spending wall, Tiffany’s stock plunged this morning after the company's latest earnings confirmed that its revitalization efforts hit a pothole in Q3 as the luxury jewelry retailer's new designs and marketing failed to lure enough shoppers entering the critical holiday period. The shares fell as much as 13% in the pre-market.

While Tiffany reported Q3 EPS of 77 cents that matched consensus estimates, net sales of $1.01 billion missed estimates of $1.05 billion, but what disappointed traders was the miss in Q3 same-store sales which rose just 3% on a constant currency basis, falling far short of the average estimate of 5.6%, and a significant slowdown from the last two quarters' growth rate.

Broken down by region, the growth slowdown was pervasive:

  • 3Q Japan comp sales constant currency +2%, estimate +9.2%
  • 3Q Europe comp sales constant currency 0%, estimate +3%
  • 3Q Asia Pacific comp sales in constant currency +4%, estimate +3.6%
  • 3Q Americas comp sales in constant currency +5%, estimate +6.8%

Tiffany cited “mixed results” in parts of Asia, and noted "lower-than-expected spending in the third quarter attributed to Chinese tourists in the U.S. and Hong Kong and lower wholesale travel-retail sales in Korea."

The comments were similar to those made over the last couple of months by European luxury companies like Kering, Moncler, and will heighten already rising concerns in the luxury industry about the health of Chinese spending amid reports of a customs crackdown on unauthorized imports, which one month ago led to a near-record plunge in share of LVMH.

As Bloomberg notes, the jeweler enters the crucial holiday season in need of a boost, with CEO Alessandro Bogliolo and head designer Reed Krakoff seeking to re-imagine the 181-year-old jeweler to appeal to younger shoppers, but the results show work remains to be done.

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Carol D. Richards 11 months ago Member's comment

But why are the tourists being stingy?

Gary Anderson 11 months ago Contributor's comment

Could be because the Yuan dropped in value coupled with China's nationalism which is stronger thanks to our madman in chief. The problem is that China is a large buyer of the world's luxury goods. Trump has forced the currency down and there is fear it must go lower. While Americans spend thinking the USA is invincible, the Chinese are more aware. We have been the most arrogant nation, and the oil embargo, the dot com crash, the Great Recession, and Trump tariffs have done little to stop American arrogance. But a full fledged Second Great Depression may just do the trick!

Carol D. Richards 11 months ago Member's comment

So if it is a matter of the Yuan being worth less, they aren't being stingy, but rather practical.

Adam Reynolds 11 months ago Member's comment

Maybe but you would think Macy's would have factored that in.