Troubles in the U.S. hit Tiffany & Co.’s first quarter hard and prompted a weaker outlook for the year, pulling the jeweler’s stock to a new 52-week low on Thursday.
The upscale retailer blamed flat earnings on a slowdown in the Americas, but it remains to be seen if the troubles are company-specific or indicative of a broader deceleration in the luxury market.
Tiffany shares slid 6.8 percent to $57.59 and hit a new 52-week low of $55.75 in midday trading. Rival Signet Jewelers Ltd., which also reported earnings, saw its stock fall 7.8 percent to $44.01 after it said it experienced a slowdown at the high-end of its offering. Further down the price scale, Zale Corp.’s shares tumbled 6.8 percent to $2.46 after it indicated softness in its U.S. business earlier this week.
Decelerating sales in the Americas and Asia-Pacific pushed the New York-based Tiffany to revise its annual profit guidance to between $3.70 and $3.80 a share from a range of $3.95 and $4.05. Wall Street expected earnings of $3.97 a share for the year.
Implicit in Tiffany’s guidance is a decline in earnings in the second and third quarters, which is surprising considering how bullish the brand had been at the end of March when year-end results were released. At the time, the luxe jeweler showed slowing financial results in the fourth quarter, but raised its annual guidance above Wall Street’s expectations, adding that the deceleration was “not a long-term phenomenon.”
Although Tiffany had acknowledged a slowdown, it “did not factor in enough of the difficult year-over-year comparisons,” as well as the “more recent” global economic volatility, chief financial officer and senior vice president Pat McGuiness told analysts on the conference call Thursday.
When pressed to explain further why the brand decided to raise guidance in spite of the deceleration, Mark Aaron, vice president of investor relations, told WWD: “Our regional store management thought [the guidance] was achievable.
“With hindsight, they didn’t factor in the difficult year-over-year comparisons,” he said. “I’ve had a lot of push-back from investors because of that. Having gone through the first quarter and realizing the comparisons are tougher than the company had anticipated, we took the opportunity to tweak those assumptions.”
Aaron cited data from MasterCard SpendingPulse that indicated a slowdown in spending in the luxury jewelry segment. According to SpendingPulse, which monitors all U.S. sales activity by cash, check or credit card, the high-end jewelry market began decelerating at the end of 2011. In the fourth quarter, sales increased 7 percent year-over-year, while in the first quarter, they rose 5.3 percent. But business took a dive in the month of April, declining 3.7 percent. The broader luxury market rose 13 percent in the fourth quarter and increased 6.7 percent in the first quarter and edged up 1.8 percent in April.
Michael McNamara, vice president of MasterCard SpendingPulse, said a pullback in spending from European tourists has played a large role in the broader slowdown.
This was evident at Tiffany, which uncharacteristically saw a 4 percent dip in same-store sales at its New York flagship. The decline was due partially to a decline in spending from European tourists, as well as tougher year-over-year comparisons.
“We really have to wait and see how the story plays out in Europe to see if this is the start of something more severe,” McNamara noted.
Nonetheless, Tiffany’s tepid first-quarter results couldn’t be squarely attributed to a European slowdown.
For the period ended April 30, the New York-based brand posted a 0.6 percent increase in net income to $81.5 million, or 64 cents a diluted share, versus year-ago income of $81.1 million, or 63 cents a share. Profits came in 5 cents a share below the 69 cents analysts expected.
Quarterly net sales rose 7.6 percent to $819.2 million from $761 million a year earlier.
In the Americas region, which represents slightly less than half of the company’s worldwide revenues, comparable-store sales were flat after a 17 percent rise a year earlier. Comps in Asia Pacific increased 10 percent on top of a 26 percent comp gain a year earlier. In Japan, same-store sales edged up 12 percent over a 3 percent dip, while in Europe, comps were flat following a 15 percent first-quarter increase last year.
Tiffany and its competitors face the challenge of continuing to grow with signs of softness in the U.S., decelerating growth in Asia-Pacific, a Japanese economy that is still recovering from last year’s tsunami and a volatile Europe worried over its debt crisis.
“We’re just trying to weather the storm,” Tiffany’s Aaron said. “We’ve taken a long-term approach to growing our business. There is certainly no change in strategy.”
Tiffany is looking to the fourth quarter of this year to provide a much-needed bump, given stabilizing precious metal and diamond costs coupled with its 175th anniversary and a host of new jewelry launches.
“We certainly don’t think this [slowdown] is Tiffany-specific,” offered Aaron. “This company has so many huge opportunities to grow its store base and build brand awareness. There’s no need for any major course corrections here.”
My character, Dinah Madani, is just the coolest, [most] badass woman imaginable," says @amberroserevah. The actress stars in @marvel's newest series on @netflix, @thepunisher. To prepare for her role, Revah sat down with Homeland agents to get a real sense of with Dinah's day-to-day life is really like. Read our full interview on WWD.com. #wwdeye (📷: @jilliansollazzo)
A scene from the 91st annual @macys Thanksgiving Day Parade. The parade, which boasts 50 million TV viewers and 3.5 million on-site spectators, is considered one of the largest and most watched parades in the world. (📷: Jason Szenes/EPA-REX)
The circus came to @bloomingdales 59th Street on Tuesday night and lit up Lexington Avenue with acrobatic dancers, death-defying knife throwing, sword swallowing and aerial acts with no net. The 45 minutes of theatrics built up to unveiling the holiday windows depicting @swarovski crystal-encrusted circus pieces and scenes from “The Greatest Showman” – songs from the soundtrack included. See the rest of the photos on WWD.com #wwdfashion (📷: Joshua Scott)
The psychedelic fashion that pervaded the ’60s is back with an exhibit at the @museumofcityny. “Mode New York: Fashion Takes a Trip” chronicles the changing styles from 1960 through 1973 and features designers such as @ysl, @oscardelarenta and more. The exhibition, which is on display through April 1, is organized into four periods: First Lady Fasion, Youthquake, New Bohemia and New Nonchalance. Pictured here is model Pat Bardonella during the Garvey Day Parade in 1968. (📷: @kwamebphoto) #wwdeye #wwdfashion
“People should be a lot more honest in expressing both the dark and light of themselves. We need to give each other the space to do that because it’s the only way we can grow and evolve,” says @noelwells of her new film “Mr. Roosevelt,” which is largely based on her own struggles. Unexpectedly leaving @nbcsnl in 2014 after just one season, Wells felt set back in her self-esteem and career trajectory. She quickly refocused her energy to more personal projects, which led to the completion of “Mr. Roosevelt.” Read the rest of WWD’s interview with the “Master of None” actress on WWD.com #wwdeye (📷: @jilliansollazzo)
@barbrastreisand is giving fans a chance to see her perform up close in a new concert series, which makes its debut on @Netflix today. From behind-the-scenes takes to her concert performance in Miami last December, the two-hour streaming special captures Streisand in her element. Pictured here is the singer/actress photographed for WWD in 1963. (📷: Palmieri Tony) #wwdeye #wwdarchive
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)