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FinancialsJun 09, 2020
Tiffany’s U.S. Sales Fall 45% in Q1
The jeweler saw a steep decline in worldwide sales as the COVID-19 pandemic kept its stores shuttered.
The redesigned Tiffany & Co. flagship store at Shanghai Hong Kong Plaza. The jeweler’s sales took a double-digit hit in the Asia-Pacific region, and in all regions, amid pandemic-related store closures. (Image courtesy of Tiffany & Co.)
New York—Tiffany & Co. posted a double-digit drop in worldwide sales as the luxury jeweler grapples with the closure of its stores amid the coronavirus pandemic.
Its fiscal year began Feb.1 and ended April 30, so the COVID-19 pandemic had an effect on the entire first quarter.
Worldwide net sales in the first quarter sank 45 percent to $556 million, compared with $1 billion a year ago. Same-store sales also plummeted 44 percent.
As of April 30, 70 percent of Tiffany’s stores worldwide remain closed, though reopenings are happening slowly.
CEO Alessandro Bogliolo described the first quarter as “very challenging,” in a press release, and said he expects the impact of COVID-19 to negatively affect the company’s full-year sales and earnings relative to 2019.
Though Tiffany did not provide guidance for the year ahead, Bogliolo said: “I am confident Tiffany’s best days remain in front of us because there is evidence that the strategic decisions we took to focus on our mainland China domestic business, global e-commerce, and new product innovation are paying off - even against the backdrop of a global pandemic.”
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Tiffany’s online sales performed well, he said, noting sales were up 23 percent worldwide with the U.S. seeing a 14 percent increase. In May, online sales more than doubled those of last May with increases seen in every region.
Online sales now account for 15 percent of total sales, more than double the 6 percent posted in the last three fiscal years.
In the Americas, where the most Tiffany stores are located, net sales in the first quarter fell 45 percent to $225 million with same-store sales down 45 percent as nearly all stores in the region closed in mid-March and remained closed through the end of the quarter.
In the Asia-Pacific region, first-quarter net sales were down 46 percent to $174 million with same-store sales falling 45 percent, also due to store closures.
Stores in mainland China began to reopen in February with 85 percent of Tiffany’s locations partially or fully open by April 30.
Bogliolo said the jeweler’s performance in mainland China is a sign “that a robust recovery is underway.”
He noted that while retail sales in mainland China were down 85 percent in February and down 15 percent in March, they were up 30 percent by April, each as compared year-over-year.
By May, retail sales were up approximately 90 percent in spite of global sales being down 40 percent that month, compared with last May.
European sales fell 40 percent to $61 million in the first quarter with same-store sales down 42 percent.
Store closures were behind the decline in Europe as well, though stores began to slowly reopen around April with 15 percent of its locations partially or fully open by April 30.
In Japan, sales declined 40 percent in the quarter to $86 million with same-store sales down 41 percent, due to store closures combined with a drop in tourist traffic.
As of April 30, approximately 5 percent of its stores in the region were fully or partially open.
Sales from the “other” segment, which includes five Tiffany stores in the United Arab Emirates, sank 65 percent to $9 million due to the impact of the coronavirus and lower wholesale sales of diamonds.
By category, sales from Tiffany’s jewelry collections, which includes lines like “Paper Flowers,” fell 44 percent while engagement jewelry sales were down 49 percent.
The new Tiffany T1 collection is “off to a tremendous start,” said Bogliolo, noting its sales through May were in line with the company’s initial projections in spite of the store closures.
The company expects year one sales of the collection to eclipse year one sales of both the Tiffany HardWear and Paper Flowers collections combined.
It may even surpass sales of Tiffany T-color, said Bogliolo, which was launched last October and is often out-of-stock due to “overwhelming demand.”
Sales of jewelry from designers Elsa Peretti, Paloma Picasso and Tiffany & Co. Schlumberger fell 39 percent in the first quarter.
As of April 30, there were 324 Tiffany stores in operation worldwide, including 123 in the Americas, one fewer than in the fourth quarter. Two stores closed and two relocated.
Tiffany did not hold an earnings call or provide fiscal guidance due to its pending acquisition by LVMH.
The deal was said to be on thin ice due to the deteriorating situation in the U.S. market, but Bogliolo stated that Tiffany will continue on its “journey with LVMH by our side.”
The merger also received regulatory approval from Russia and Mexico as it looks to clear antitrust/competition barriers.
Tiffany has also amended its debt agreements to give itself “ample headroom” to remain in compliance with its financial agreements, said CFO Mark Erceg in a press release, though he noted the company is in compliance with all debt covenants as of April 30.
The company plans to “significantly” reduce costs and lower its capital expenditures by postponing select projects for the year, though it did not get into specifics, as a way to protect its earnings and preserve cash.
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