Tiffany & Co. said Thursday worldwide net sales in the second quarter fell 2 percent year-over-year to $991 million. On a constant-exchange-rate basis worldwide net sales and comparable store sales increased 7 percent due to growth in Japan, Europe and Asia-Pacific, as well as increased sales of fashion gold jewelry and statement jewelry.
The luxury retail jeweler reported that net earnings for the second quarter fell 16 percent to $105 million. It blames the drop in sales and earnings on unfavorable effects from a strong U.S. dollar, a large impairment charge and higher SG&A expenses. Excluding the impairment charge, which was a loan to a diamond mining company, earnings declined 10 percent.
The company downgraded its earnings for the year to 2 percent to 5 percent lower than the prior year.
Frederic Cumenal, Tiffany CEO, said the negative impact of a strong US dollar was greater than originally expected.
“We entered this year expecting translation and tourism-related pressures on sales and earnings from the exceptionally strong U.S. dollar, as well as challenging economic conditions in certain markets,” he said. “The adverse effects from the strong dollar have been even more significant than initially expected.”
By region, second quarter sales are as follows:
The Americas - Total sales of $475 million in the second quarter were 2 percent below the prior year, the company said. On a constant-exchange-rate basis both total sales and comparable store sales in the second quarter were equal to the prior year for the second quarter. Higher sales to U.S. customers contrasted with lower foreign tourist spending in the U.S. which management attributes to the strong U.S. dollar. The company added that there was healthy comparable store sales growth in Canada and Latin America.
Asia-Pacific – Total sales rose 4 percent to $245 million in the second quarter. On a constant-exchange-rate basis total sales and comparable store sales in the second quarter rose 9 percent and 6 percent, respectively, while total sales and comparable store sales rose 6% and 4% in the first half. Double-digit sales growth in China and Australia was combined with mixed performance in other markets.
Japan - Total sales in Japan rose 5 percent to $125 million in the second quarter. On a constant-exchange-rate basis total sales and comparable store sales in the second quarter increased 27 percent and 21 percent respectively, benefiting from higher sales to foreign tourists.
Europe - Total sales in Europe rose 2 percent to $123 million in the second quarter. On a constant-exchange-rate basis both total sales and comparable store sales in the second quarter rose 19 percent, as growth in the UK and across the continent largely benefitted from higher spending by foreign tourists and, to a lesser extent, an increase in spending by local customers, the company said.
Other Sales – This category experienced a 33 percent decline to $23 million in the second quarter. On a constant-exchange-rate basis, the decline was 27 percent due to lower wholesale sales of diamonds but rose 8 percent on a comparable store sales basis.
Tiffany opened six company-operated stores in the second quarter: Geneva, Switzerland; two in China in Shanghai and Hangzhou; in Bangkok, Thailand; in Macau; and in Ottawa, Canada. The company operates 304 stores worldwide.
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