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Tiffany Declines as Sales in Europe, North America Disappoint

Updated on
  • Asia-Pacific was bright spot, with sales topping estimates
  • Bogliolo joined Tiffany this year after Jana pushed for change

Tiffany & Co. fell the most in more than two months after stagnant sales worldwide showed the jeweler’s efforts with new designs and store renovations has yet to resonate with more customers.

Same-store sales -- a key retail metric -- were flat globally and in North America last quarter, while they tumbled 8 percent in Europe, the company said Wednesday. The results sent the shares down as much as 3.7 percent in New York trading.

“The continued lack of sales growth” is worrisome, said Brian Yarbrough, an analyst at Edward Jones & Co. “We still haven’t seen a turn in the business” where comparable sales are accelerating across the board, he said.

Chief Executive Officer Alessandro Bogliolo, hired earlier this year after hedge fund activist Jana Partners pushed for changes, has rolled out new products, opened a cafe at its flagship Fifth Avenue store in New York and stepped up marketing, including promotions by Lady Gaga for its HardWear collection. He said the results “marginally exceeded our expectations,” and that Tiffany has the potential to drive earnings growth and profitability.

Tiffany shares fell as low as $90.55 in New York trading, marking their biggest intraday decline since Sept. 22. They had gained 21 percent this year, lifted by comeback hopes.

Earnings amounted to 80 cents a share, topping the 76-cent estimate of analysts. Net sales came in at $976.2 million, well ahead of the $957 million projected.

Brian Tunick, an analyst at RBC Capital Markets, said that while same-store sales were flat in North America, they had at least stabilized after multiple quarters of declines. However, sales in Europe were “disappointing, particularly compared to strong results European luxury peers have been reporting,” he said.

Bogliolo addressed that on a conference call with investors after the earnings were released.

“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.

In a bright spot, the company posted comparable-sales growth of 2 percent in the Asia-Pacific region last quarter. That compared with a 1.4 percent decline predicted by analysts, according to Consensus Metrix. Tiffany pointed to strong growth in mainland China for fueling the sales.

China’s luxury market, which had suffered under the nation’s crackdown on corruption, is bouncing back as people are making high-end purchases again, said Yarbrough at Edward Jones.

“Asia was a big surprise,” he said. “Everyone is positive about China, but this is above what everyone was thinking.”

The New York-based company also maintained its sales and earnings guidance for the year.

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