Tiffany & Co. on Wednesday reported that worldwide net sales declined 7 percent to $891 million and comparable store sales declined 9%, year-over-year, for the first quarter of 2016. Sales declined in all regions except Japan, which the luxury jeweler attributes to “a continuation of softness in spending by both local customers and foreign tourists.”
Net earnings were also lower than the prior year resulting from a decline in the operating margin, as improved gross margin was more than offset by a lack of sales leverage on operating expenses, the New York-based company said
On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 7 percent, and comparable store sales declined 9 percent.
Net earnings fell 17 percent year-over-year to $87 million.
“As expected, this was a difficult quarter in terms of both sales and earnings growth,” said Frederic Cumenal, Tiffany & Co. CEO. “We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong.”
Net sales by region in the first quarter are as follows:
In the Americas, total sales fell 9 percent to $403 million and comparable store sales declined 10 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales declined 8 percent and 9 percent, respectively, due to “varying degrees of softness in spending by U.S. customers and foreign tourists.”
In the Asia-Pacific region, total sales fell 8 percent to $238 million and comparable store sales declined 15 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales declined 5 percent and 12 percent, respectively. The company said total sales growth in China and Korea was offset “by a continued significant decline in Hong Kong and more moderate declines in other markets.”
In Japan, total sales of $131 million were 8 percent above the prior year and comparable store sales increased 12 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales rose 1 percent and 5 percent, respectively. Management attributed the sales growth to higher spending by local customers.
In Europe, total sales fell 9 percent to $97 million and comparable store sales declined 15 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales declined 7 percent and 14 percent, respectively, “due to softness in most countries, led by France, attributed largely to lower foreign tourist spending.”
Other sales declined 30 percent to $22 million, and comparable store sales declined 21 percent, reflecting lower retail sales in the United Arab Emirates and wholesale sales in other markets.
Tiffany updated its full year earnings forecast and now expects a decline by a mid-single-digit percentage from 2015’s adjusted earnings per diluted share.
Tiffany opened two company-operated stores in the first quarter (in Europe) and closed one location (in Japan). As of April 30, the company operated 308 stores (124 in the Americas, 81 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE), compared with 298 stores a year ago (123 in the Americas, 75 in Asia-Pacific, 56 in Japan, 39 in Europe, and five in the UAE).
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