Asia drives modest Tiffany & Co growth
Tiffany & Co boosted its operating margin in the first quarter, but a sales rise of 1 per cent worldwide masked poor same-store results.
Asia-Pacific drove that modest growth, which took the jeweller’s global sales to US$900 million, largely due to increased wholesaling of diamonds. Same-store sales fell 3 per cent. On a constant exchange-rate basis, worldwide net sales rose 2 per cent, while same-store sales fell 2 per cent. Net earnings rose by $6 million to $93 million, due to improved gross margin.
Chairman and interim CEO Michael J Kowalski said while the results modestly exceeded the company’s expectations, it remains focused on executing long-term strategies to achieve “stronger and sustainable performance through product introductions, optimisation of its store base, effective marketing communications and the delivery of experiences that resonate with our customers”.
Asia-Pacific sales totalled $257 million, up 8 per cent on the prior year, however same-store sales declined 3 per cent.
“Management attributed total sales growth to increased wholesale sales and the effect of stores opened in the past year, while comparable store sales were affected by strong growth in Mainland China and varying degrees of softness in other markets. On a constant-exchange-rate basis, total sales rose 9 per cent and comparable store sales declined 2 per cent.
In Japan, total sales of $128 million were down 2 per cent on the prior year, and comparable store sales declined 1 per cent. Management attributed the sales declines to lower spending by Chinese tourists. On a constant-exchange-rate basis, total and comparable store sales declined 3 per cent and 1 per cent, respectively.
The gross margin increased to 62 per cent in the first quarter, from 61.2 per cent a year ago, primarily reflecting favorable product input costs and a shift in sales mix toward higher margin fashion jewelry products, partly offset by increased wholesale sales of diamonds.
Tiffany did not open any company-operated stores during the first quarter and closed three. At April 30, 2017, Tiffany & Co operated 310 stores, including 84 in Asia-Pacific and 54 in Japan.