Tarnished Tiffany hurts in Q4, outlook weak until H2

All that glistens… There was nothing golden about Tiffany & Co as the upscale jeweller said dotcom sales and profit fell in Q4, and warned profit in its current quarter would be worse than expected.

Chief Executive Frédéric Cumenal also warned that the strong dollar and uncertain economic and stock market conditions will continue to dampen higher-end consumer spending in coming quarters.

Tiffany said it expects adjusted EPS in Q1 to decline 15-20%, followed by a 5-10% decline in Q2 followed by expected growth in H2. Analysts expect roughly 6% declines in Qs 1 and 2.

For the year, Tiffany expects an adjusted EPS of flat to a mid-single-digit percentage decline. Analysts expected a 1% increase.

In addition to the strong dollar and weak spending by tourists, Cumenal told Dow Jones domestic consumer spending was “fickle” in the US during the quarter. He cited economic uncertainty, volatility in financial markets and “a particularly tense electoral campaign” for Americans’ reluctance to spend.

However, the US market was healthier than Hong Kong, he noted: “Hong Kong continues to be a nightmare. There is no other word.

“I believe this is the same for all of us, all luxury players… and we don’t believe that situation will significantly improve in Hong Kong during 2016.”

For the quarter, Tiffany reported a profit of $163.2m/$1.28 a share, down from $196.2m/$1.51 a share, a year prior. Excluding a loan impairment and other charges, Tiffany posted adjusted earnings per share of $1.46. Analysts projected $1.40 adjusted EPS.

Revenue fell 5.6% to $1.21bn, in line with analysts, as com sales fell 9% in the quarter and 5% on a constant-currency basis. Comps fell 8% in The Americas and declined in all its regions except in Japan, where comps lifted 9%.

Gross margin rose to 63% in Q4, from 60.8% in the year prior on lower input costs and price increases.

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