Chinese pass on breakfast at Tiffany’s

Tiffany’s plunge seen as omen for luxury retail sector amid international trade uncertainty and currency shifts.

Evidence of China’s slowing economy has popped up in the sales numbers posted by luxury goods retailer Tiffany & Co.

Although revenue rose 4 per cent to just above US$1 billion (NZ$1.45b) in the third quarter, industry analysts were anticipating a bigger boost. Some of that unexpected drag is taking place because spending by Chinese tourists is falling.

Company shares plunged more than 11 per cent before the opening bell and there is some concern that sales at Tiffany are a dark omen for the entire luxury retail sector.

Chinese economic growth declined to a post-global crisis low of 6.5 per cent in the quarter than ended in September. A trade fight with the Trump administration is pressuring China’s leaders to energise economic activity that has weakened since Beijing clamped down on bank lending last year as it tries to rein in surging debt.

This was the second time in as many months that a big seller of high-end goods noticed that a particularly crucial demographic of its shopping base had made itself sparse, damaging sales and stoking fears of worse to come.

Last month, the owner of Louis Vuitton noted the same phenomenon of dwindling Chinese tourists. Shares in that company were hit hard as well.

Tiffany is considered a bellwether for luxury goods, which is why shares of Ralph Lauren and Movado also fell, even as the broader sharply.

‘‘We don’t see a slowdown of demand by the Chinese. What we see is that Chinese tourists are travelling less,’’ said Tiffany CEO Alessandro Bogliolo.

In fact, Bogliolo said that Tiffany’s business in mainland China remains strong, achieving double digit sales growth throughout the year. In response to the shift, Tiffany’s is increasing its inventory at its stores in mainland China.

Bogliolo speculated that the deteriorating value of China’s currency is to blame for the drop in Chinese tourists.

The yuan sank to a 10-year low against the US dollar at the end of October. It strengthened slightly this month, leading many to believe that Beijing has stepped in to stop its slide.

But others see broader issues at play, including a simmering trade war and the potential for a slowing global economy that is squeezing even the wealthy in China.

‘‘There are major strains in our political relationship with the Chinese government,’’ said Robert Burke, a luxury consultant in New York. ‘‘It doesn’t put them in the mood to come to the US to spend their hard-earned dollars. They do have the option to buy in mainland China.’’

It’s not a healthy trend sellers of high-end goods.

Burke estimates that as much as 30 per cent of luxury goods sales globally are made to tourists from China. Dan Jasper, a spokesman at Mall of America, the largest shopping mall in the US, noted that Chinese tourists tend to be more likely to purchase higher-end items including luxury cosmetics, jewellery, clothing and electronics.

What may have exacerbated fears this week is that prevailing wisdom has held that consumer spending from China in the highend luxury shops of the West would not only continue, but that it would grow stronger.

In a study published this month, the Bain consultancy said that Chinese consumers will fuel nearly half of global high-end sales by 2025.

Chinese shoppers will account for 46 per cent of global luxury sales of an estimated US$412b in just six years, Bain said.

Even before the Trump administration ratcheted up the intensity of its trade dialogue with Beijing, there were signs that economic growth in China was slowing.

Chinese economic growth declined to a post-global crisis low of 6.5 per cent in the quarter than ended in September. stock market climbed for