Chinese tourists might have put away their wallets this fall, dealing a third-quarter blow to Tiffany & Co., but chief executive officer Alessandro Bogliolo is looking at the longer term — and likes what he sees for the American luxury brand.
“We have not seen a slowdown in demand, at least for Tiffany, by the Chinese customer,” Bogliolo told WWD in an interview after the jeweler revealed its results Wednesday. “Sales in mainland China have been [up] double digits.”
But the story of Chinese luxury shoppers abroad is different, with a weaker yuan contributing to more austere ways. Typically, Chinese luxury consumers make two-thirds of their purchases while they travel.
Tiffany’s third-quarter net income declined 5 percent to $94.9 million as worldwide sales rose 3.7 percent to $1 billion. Excluding currency fluctuations, comparable sales increased 3 percent — well below the 5.4 percent gain analysts projected.
Results were propped up by Tiffany customers in each region who logged on to buy or went to their local stores. But Wall Street zeroed in on the slowdown in the Chinese tourist spend and sent shares of Tiffany down 11.8 percent to $92.54.
Bogliolo, a former Diesel executive who has been ceo of Tiffany for just over a year, is also focusing on the Chinese shopper. But where investors clearly see weakness, he sees signs of strength and broader trends that say more about Chinese shoppers right now and currency changes and less about Tiffany’s prospects.
The company cited official Hong Kong statistics that showed 10 to 20 percent increases in Chinese tourist arrivals during the first eight months of the year, followed by a low-single-digit increase in September. One yuan translated into 1.23 Hong Kong dollars in April, but now fetches 1.13 Hong Kong dollars, an 8.1 percent drop.
But that’s right now and Tiffany and the other luxury players are clearly preparing — and hoping for — growth measured more in decades than months.
“The Chinese population is a major growth driver for the luxury industry,” Bogliolo said. “For me, what is crucial is that we are relevant for them. We know that the future — not only one quarter, but the future of this brand — has a lot to do with the relevance of Chinese consumers [who] in general buy at a higher average ticket than Americans or Europeans or Japanese customers.”
The Chinese tourist is just one macro factor facing luxury brands — another is the stock market, which has been shaky lately after a long run, spurring some worries that equity-rich high-end consumers will pull back.
However, Bogliolo said cause and effect can be difficult to connect when it comes to the wealthy and their stock portfolios. And besides, he said the brand has enough price points to suit the climate, ranging from $200 to into the millions.
“You come to Tiffany, it’s the palace of jewels and you find it all,” he said. “The customer will swing to one side or the other, this is the beauty of Tiffany, there is an intrinsic balance.”
The New York-based Tiffany stands out on the luxury scene, which is dominated by European brands, many of them tied to mega groups like Kering, LVMH Moët Hennessy Louis Vuitton or Compagnie Financière Richemont.
But Bogliolo is happy to be different.
The ceo said Tiffany is more inclusive than its European counterparts with a more understated approach. “European luxury tends to be more about formality, Tiffany tends to be more informal,” he said.
And informal, understated and inclusive amount to something of a sweet spot.
“These are all characteristics in society that are even more relevant today than they were in the past,” Bogliolo said. “These are a strong point of differentiation and strength. The future is going to be about an elegance that is understated, but can be used every day.”