BLING IS BLAH

Tif­fany’s Co. hopes new CEO will help it out­run in­dus­try sales slump,

Toronto Star - - SMART MONEY - STEPHANIE WONG

As Tif­fany & Co.’s new chief ex­ec­u­tive of­fi­cer set­tles into the job, he faces a cri­sis that runs deeper than slug­gish re­tail traf­fic: Amer­i­cans are los­ing their pas­sion for jew­elry.

From in­dif­fer­ent mil­len­ni­als to de­clin­ing mar­riage rates and syn­thetic im­i­ta­tions, few prod­uct cat­e­gories are con­tend­ing with as many head­winds as jew­elry. Com­pa­nies are scram­bling to halt slump­ing sales and shut­ter un­prof­itable stores as dis­cre­tionary spend­ing falls and share­holder un­rest bub­bles over.

The $60-bil­lion (U.S.) jew­elry mar­ket con­tracted 6.3 per cent last year and the de­clines will con­tinue un­til at least 2022, the re­search firm Euromon­i­tor es­ti­mates. Jew­elry store clo­sures ac­cel­er­ated 53 per cent in 2016, ac­cord­ing to the Jewel­ers Board of Trade.

“My con­cern is al­ways for the longterm health of our in­dus­try,” says An­thony Ca­puano, who heads the board. “I think there will al­ways be jew­elry sales. But right now, I think there is not as much in­ter­est in jew­el­ries.”

Tif­fany’s out­look re­flects this clearly: Fewer shop­pers are go­ing into its stores and it’s been un­able to draw in mil­len­ni­als — who are fa­mously luke­warm on many prod­ucts and feel the same way about jew­elry. Same­store sales have dropped in the past five out of six quar­ters.

Amid the tur­moil, Tif­fany is bet­ting in­dus­try vet­eran Alessan­dro Bogli­olo will be able to right the ship and rein­vig­o­rate the chain’s 180-year-old brand. He will take over ef­forts to at­tract younger shop­pers by ren­o­vat­ing stores and in­tro­duc­ing new de­signs.

Cit­i­group Inc. has likened Tif­fany’s bal­anc­ing act of at­tract­ing mil­len­ni­als with­out alien­at­ing its older cus­tomers as “Lady Gaga ver­sus Audrey Hep­burn.” (Gaga pro­motes the Hard­Wear col­lec­tion on sale at Tif­fany’s, while Hep­burn wore the fa­mous Tif­fany Di­a­mond in pub­lic­ity shots for the classic 1961 film Break­fast at Tif­fany’s.)

Ac­tivist in­vestor Jana Part­ners has said Tif­fany’s shares are un­der­val­ued, while another in­vestor, CtW In­vest­ment Group, is push­ing for more diver­sity and younger directors on the jew­eller’s ag­ing board.

Signet Jewel­ers Ltd., the owner of the Kay, Zales and Jared brands, also has storms on the hori­zon. The com­pany is clos­ing as many as 170 mall­based stores as it seeks to leave be­hind a gem-swap­ping scan­dal and al­le­ga­tions of gen­der dis­crim­i­na­tion.

Signet sees im­prove­ments to its web por­tal as key to com­pet­ing with new ri­vals that are cap­tur­ing mar­ket share. These in­clude Blue Nile Inc. and JamesAllen.com, which of­fers shop­pers a vir­tual ring sizer, 360de­gree views of gem­stones and an in­ter­face for cus­tomers to de­sign their own rings.

Com­pe­ti­tion is also heat­ing up from re­gional play­ers that have their fin­gers on the pulse of lo­cal com­mu­ni­ties, Ca­puano said.

“Jew­elry has def­i­nitely been tough and mil­len­ni­als are shift­ing their spend­ing to ex­pe­ri­ence,” said Brian Yar­brough, an an­a­lyst at Ed­ward Jones & Co. “That lim­its your abil­ity to show a lot of growth.”

Signet shares have lost more than a third of their value this year, though they were up less than 1 per cent to $60.82 last Fri­day. Tif­fany has fared bet­ter, helped by a board shakeup that brought in­vestors op­ti­mism that the com­pany could turn things around. Tif­fany shares were lit­tle changed Fri­day.

An ad­di­tional prob­lem, ac­cord­ing to the head of an in­dus­try group, is that jew­elry sell­ers have lost a deeper con­nec­tion with their cus­tomers.

“The in­dus­try has be­come so im­per­sonal in many ways. We’ve lost the emo­tion,” Jean-Marc Lieber­herr, CEO of the Di­a­mond Pro­duc­ers As­so­ci­a­tion, said in an in­ter­view in New York.

He points to re­tail­ers’ ef­forts to fo­cus shop­per at­ten­tion on cer­tifi­cates that ver­ify a di­a­mond’s qual­ity — per­haps only slightly more ro­man­tic than a low-risk mu­tual fund. Stores must get clients’ hearts racing, he says, and his group has boosted ad- ver­tis­ing to help in­spire change.

The ads seek to up the drama quo­tient: One short film that aired at the Acad­emy Awards ti­tled Run­aways tells an ac­tor’s story of how he eloped with his part­ner. Another shows a young New York cou­ple get­ting en­gaged on cam­era.

The de­cline in mar­riage rates has hurt the in­dus­try. Fewer than half of U.S. adults are mar­ried to­day, com­pared with 72 per cent in 1960, ac­cord­ing to Pew Re­search Cen­ter.

De­spite the ar­ray of chal­lenges, Ca­puano of the Jewel­ers Board warns that jew­elry has al­ways been a cycli­cal busi­ness. “It’s an evo­lu­tion,” he said. “It’s change that we need to adapt to.”

WILFREDO LEE/THE AS­SO­CI­ATED PRESS FILE PHOTO

Tif­fany & Co. hopes new CEO Alessan­dro Bogli­olo will help it ride out the in­dus­try de­cline that re­search es­ti­mates will last un­til at least 2022.

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