Tiffany’s Q2 Sales Sink, E-commerce Shines

FinancialsAug 27, 2020

Tiffany’s Q2 Sales Sink, E-commerce Shines

U.S. ecommerce sales surged 122 percent in the second quarter as the COVID-19 pandemic kept shoppers at home.

A Tiffany “Soleste” round engagement ring in platinum with diamonds. The jeweler posted a 29 percent drop in worldwide sales in its recent second-quarter results. (Photo courtesy of Tiffany & Co.)

New York—Tiffany & Co.’s worldwide sales sank double digits in the second quarter as the COVID-19 pandemic continued to hamper sales, though mainland China sales and e-commerce were bright spots on its balance sheet.

Worldwide net sales in the second quarter sank 29 percent year-over-year to $747 million, compared with $1.05 billion a year ago. Same-store sales also plummeted 24 percent.

Quarterly net earnings tumbled 77 percent year-over-year to $32 million compared with $136 million a year ago.

In the first half, worldwide net sales fell 37 percent to $1.3 billion, compared with $2.05 billion a year ago, while comparable sales were down 34 percent. First-half net loss was $33 million compared with net earnings of $262 million last year.

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Tiffany’s e-commerce business boomed, up 123 percent worldwide in the second quarter with the U.S. seeing a 122 percent increase.

Online sales now account for 15 percent of total sales as of the first half of the year, more than double the 6 percent the company has posted for the last three full years.

“We were excited to see that the encouraging trends we cited for the first quarter, namely, increased sales in mainland China and global e-commerce, accelerated during the second quarter and propelled our return to quarterly profitability,” said CEO Alessandro Bogliolo in a press release announcing the results.

In the Americas, where the most Tiffany stores are located, net sales in the second quarter fell 46 percent to $247 million with same-store sales down 44 percent.

As in the first quarter, the decline in sales was attributed to the effects of COVID-19 and the store closures, which affected Tiffany from March to June.

In the Asia-Pacific region, second-quarter net sales were flat at $299 million with same-store sales up 17 percent.

The company said it saw strong retail sales growth in mainland China and Korea, though it was offset by weakness in other markets due to COVID-19, store closures, and a drop in wholesale travel retail sales. Sales were down 16 percent in the first half overall.

Retail sales in mainland China began to rebound in April, said Bogliolo, and continued to gain strength in May through the second quarter. Retail sales were up 80 percent year-over-year in the second quarter.

He highlighted the company’s local marketing, especially its new Tiffany T ambassador and singer/actor Jackson Yee, which generated buzz on
Tiffany’s social media and bolstered consumer engagement.

In Europe, sales fell 28 percent to $84 million in the second quarter with same-store sales down 27 percent, also attributed to COVID-19 disruptions.

In Japan, sales declined 28 percent in the quarter to $111 million with same-store sales down 27 percent, due to the effects of COVID-19 and a decline in tourist traffic.

Sales from the “other” segment, which includes five Tiffany stores in the United Arab Emirates, sank 73 percent to $7 million due in part to lower wholesale sales of diamonds.

By category, sales from Tiffany’s jewelry collections, which includes lines like “Paper Flowers,” fell 25 percent while engagement jewelry sales were down 27 percent.

Sales of jewelry from designers Elsa Peretti, Paloma Picasso and Tiffany & Co. Schlumberger fell 26 percent in the second quarter.

The Tiffany T1 line performed especially well in the second quarter, said Bogliolo, both in mainland China and worldwide. New styles will be added to the collection in the third quarter.

“The success of Tiffany T1 reaffirms our belief that our improved design capabilities, sharpened product strategies and more disciplined execution are being well received by our loyal customers whilst also attracting new customers to the brand,” said Bogliolo.

The company recently ranked 95th on the National Retail Federation’s list of fastest-growing U.S. retailers.

As of July 31, there were 322 Tiffany stores in operation worldwide, including 123 in the Americas, the same as a year ago. Tiffany opened one store and closed five others in the first half of the year.

Looking to the year ahead, Chief Financial Officer Mark Erceg said in a press release, “Tiffany’s balance sheet remains strong with an investment grade rating and ample cash on-hand.”

Sales at the end of the fourth quarter are expected to see a mid single-digit decline year-over-year, said Erceg, an improvement compared with the double-digit drops reported this quarter.

Global sales trends strengthened in August, said Bogliolo, with preliminary month-to-date worldwide sales through Aug. 25 being slightly positive compared with the same period last year.

Tiffany did not hold an earnings call due to its pending acquisition by LVMH.

The acquisition has been pushed back to the fall from its initial August closing date as the companies wait on regulatory approvals from the European Union, Japan, Mexico and Taiwan.

Tiffany is also facing the delay of the renovation of its 10-story New York flagship on Fifth Avenue. It began in 2019 and was set to be completed by the fourth quarter of 2021 but was delayed until 2022 after nonessential construction was halted due to the coronavirus pandemic.

The jeweler has temporarily relocated to 6 E. 57th St., a four-level space dubbed The Tiffany Flagship Next Door.

Tiffany recently shared renderings of the new exterior of its original flagship, which include an upper addition of glass surrounding the eighth, ninth, and 10th floors.

The eighth, ninth, and 10th floors of the revamped Tiffany flagship on Fifth Avenue, currently under construction, will be surrounded by glass walls for a contemporary look.
Lenore Fedowis the associate editor, news at National Jeweler, covering the retail beat and the business side of jewelry.

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