Tiffany & Co. held its own in the third quarter — with higher profits and a modest sales gain — giving Alessandro Bogliolo a bit of breathing room as he looks to build competitive momentum.
Bogliolo, just seven weeks into his stint as chief executive officer, told investors on a conference call Wednesday that he’d been on a tour of the company, visiting about 40 stores in the Americas and the Asia-Pacific region, as well as manufacturing and logistics operations in New York, Rhode Island and New Jersey.
He described Tiffany’s internal operations as “powerful” and lauded the company’s workers — “It’s thanks to them, to their skills, their hands, that Tiffany can offer such a vast assortment.”
But there is work to do.
“I strongly believe that the Tiffany & Co. brand is healthy with tremendous opportunities to grow,” Bogliolo said. “As we move forward, we will leverage our core strength and adapt as appropriate while we will always remain true to our heritage and brand integrity. We will be accelerating the pace of product innovation.”
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The company will also be focused on “the most effective marketing” and its in-store and online experience.
While Bogliolo, a former Bulgari and Sephora executive, lauded Tiffany and its workers and described the brand as a “formidable competitor,” he is clearly preparing for a fight.
“We acknowledge that some of our competitors have recently posted stronger sales growth than us, which I can assure you will not be acceptable in the long term,” he said.
The company’s third-quarter net income rose 5.4 percent to $100.2 million, or 80 cents a diluted share, from $95.1 million, or 76 cents, a year earlier. Sales for the three months ended Oct. 31, increased 2.8 percent to $976.2 million, although comparable-store sales slipped 1 percent. Constant currency comparable-store sales were flat.
On a constant currency comp basis, sales were flat in the Americas and Japan, up 2 percent in the Asia-Pacific region, but down 8 percent in Europe.
Mark Aaron, vice president of investor relations, noted that the company’s overall sales growth was driven by an increase in the number of jewelry units sold, not price.
“We were pleased to see a continuation of growth in fashion jewelry and also encouraged to see a resumption of growth in the high fine and solitaire jewelry category,” Aaron said.
He added that while Tiffany has a broad assortment of diamond rings, some are looking to customize and the brand is now helping customers give their rings personalized touches by choosing a diamond cut, setting and metal.
Tiffany continues to look for mid-single-digit sales growth — a mark it missed in the third quarter. But chief financial officer Mark Erceg did note that the comp sales trend is improving, with comps having been down 3 percent in the first quarter, and down 2 percent in the second quarter before slipping 1 percent last quarter.
Wall Street is now watching the sales line closely and is going to be wanting more.
Wells Fargo analyst Ike Boruchow said investors have “basically shrugged off” Tiffany’s sales trends and focused on gross margin tailwinds.
“We believe a greater focus will be placed on the top-line performance going forward,” Boruchow said. “Until we get evidence of a sustained top-line recovery, we struggle to see a path that moves the shares higher.”
Tiffany’s stock fell 1.6 percent to $92.56 on the New York Stock Exchange.