Tiffany loses its sparkle as Chinese tourists tighten their belts
The shine came off Tiffany & Co’s shares on Wednesday after the high-end jeweller said spending by Chinese tourists had fallen away.
Tiffany & Co.
$0.00
14:25 11/03/24
On a constant-exchange basis, third-quarter underlying sales were ahead 3% in the three months to 31 October. Analysts had been looking for sales of around 5%; the figure was also down on the second quarter, when like-for-like sales grew 7%.
Net sales were $1.01bn, against $976.2m a year previously, while net earnings declined 5% to $94.9m.
The 181-year-old jeweller said local sales continued to grow at a strong rate worldwide. Chief executive Alessandro Bogliolo said: "This resulted in mid-single-digit net sales growth, despite lower-than-expected spending in the third quarter attributed to Chinese tourists in the US and Hong Kong, and lower wholesale travel-retail sales in Korea."
Luxury good companies have benefited in recent years from China’s booming economy and burgeoning consumer demand for high-end products, both domestically and overseas. Fears are growing, however, that economic growth will stall as trade tensions between China and the US escalate.
China is also cracking down on unauthorised imports, as Beijing seeks to halt tourists selling on goods bought overseas.
Tiffany said that sales on mainland China had remained strong, however.
The US group also left its full-year outlook unchanged. But investors, mindful of the crucial upcoming festive season, were less convinced, and shares tumbled by as much as 12% in pre-market trading.
Analysts at RBC Capital said they were "somewhat disappointed" by the figures.
"Although we are encouraged by ongoing strength in local spending as well as product and merchandising initiatives going into the fourth quarter, Tiffany is the first global retailer in our coverage to call out weakness due to lower spending by Chinese tourists," they said.
"We expect Tiffany stock, as well as globally exposed peers, to underperform until macro data or peer commentary on Chinese consumer spending improves."