Sales gloom over China, Brexit at Tiffany’s

TIFFANY & Co tempered its yearly profit forecast after the luxury jeweller’s sales over Christmas fell unexpectedly as Chinese tourists spent less globally due to a stronger dollar and demand softened in Europe and at home.

Like other luxury goods firms, Tiffany relies on spending by China’s burgeoning middle class as consumer demand remains subdued in the United States and Europe, weighed down at the moment by uncertainties such as a partial US government shutdown and Brexit.

During the crucial November-December period, Tiffany’s worldwide same-store sales fell 2pc while net sales dipped 1pc, against its expectations of modest increases.

Tiffany chief executive Alessandro Bogliolo blamed softer spending globally by foreign tourists, primarily Chinese, and “a lot of uncertainties and volatility” which may have hit customer demand in Europe and the Americas.

“We see Chinese tourists spending abroad going down heavily, minus 20-25, 30-35pc, and this is in many, many countries... in the US, but it’s also Hong Kong and now it’s spreading to Southeast Asia,” Bogliolo told Reuters. “For sure it’s due to the exchange rate.”

Shares of Tiffany, which have fallen 22pc in the past 12 months, were up 3pc in morning trade on Friday.

“Tourism is the culprit for TIF’s underwhelming holiday numbers, but this is not a surprise to us given the stronger dollar,” Jefferies analyst Randal Konik said.

Bogliolo also said issues such as Brexit, protests in France and the US shutdown, now in its 28th day, “makes me more cautious” about sales and earnings forecasts, but he expects a couple of “very tough” quarters.

A slowdown in spending by Chinese tourists prompted Tiffany to shy away from raising its yearly profit targets in November. On Friday, it said it expects full-year earnings for fiscal 2018 around the lower end of its estimated range of between $4.65 (€4.09) and $4.80 per share.