Tiffany & Co Reports 6% Decline in Q2 Global Sales

Aug 26, 2016

Tiffany & Co. reported a 6% decline in net sales to US$ 932 million during the three month period ended July 31, 2016, with half yearly sales at US$ 1.8 billion being 7% below the comparable period for a year earlier. The Company attributed the decline was on account of a fall in sales to both local customers and foreign tourists in most regions, while releasing its financial results for these periods yesterday.

Comparable store sales were down 8% in Q2 and 9% across the first half, the Company said.

During the second quarter, net earnings rose 1% to $106 million, or $0.84 per diluted share, from $105 million, or $0.81, in the prior year. For the first half, net earnings of $193 million, or $1.53 per diluted share, included a tax benefit of $0.05 per diluted share in the first quarter related to the settlement of a tax examination. This compared with the prior year’s $210 million, or $1.62 per diluted share.

Frederic Cumenal, chief executive officer, said, “The global environment continues to reflect well known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists, especially from China.

The decline in sales was fairly widespread across regions. In the Americas, total sales of $434 million in the second quarter and $837 million in the first half were both 9% below last year, with declines of 9% and 10%, respectively, in comparable store sales. This was attributed the declines to lower spending by U.S. customers as well as by Chinese and other foreign tourists.

In the Asia-Pacific region, total sales of $230 million in the second quarter and $469 million in the first half were 6% and 7%, respectively, lower than the prior year, and comparable store sales declined 12% and 13%, respectively. Sales growth in China and Korea was offset by a continuation of significant declines in Hong Kong and more moderate declines in most other markets.

In Japan, total sales increased 10% to $138 million in the second quarter and rose 9% to $269 million in the first half due to comparable store sales growth of 13% and 12%, respectively. Management noted lower spending by Chinese tourists in both periods.

In Europe, total sales declined 12% to $111 million in the second quarter and 11% to $208 million inthe first half, due to respective declines of 17% and 16% in comparable store sales.

Lower sales in continental Europe were attributed by management to weak demand by foreign tourists and local customers, in contrast to better performance in the United Kingdom.

Other sales declined 3% to $18 million in the second quarter and 20% to $40 million in the first half, reflecting comparable store sales declines of 22% and 21%, respectively. Management noted lower retail sales in the United Arab Emirates and an increase in wholesale sales of diamonds.

The Company said that it is managing expenses efficiently,  while maintaining marketing spending as a percentage of sales and continuing to invest in key strategic initiatives and opportunities to further strengthen Tiffany’s competitive position among global luxury brands. It said that the focus was on growing sales, operating margins and earnings, and creating greater value for stockholders.

The Management said it is maintaining its outlook for the second half of the year expecting a low single digit percentage decline in sales.

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