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Tiffany sees earnings drop due to declining tourist spending

Jewellery retailer Tiffany & Co’s net sales increased 4 per cent to US$1 billion in the third quarter of FY18, while net earnings dropped 5 per cent to US95 million.

The retailer attributed this disparity to an increase in local consumer spending in all regions, offset by decreased spending from Chinese tourists in certain regions.

“It’s worth noting that in the third quarter our sales attributed to local customers continued to grow at a strong rate worldwide and were positive in every region, with particularly strong growth in mainland China,” Tiffany chief executive Alessandro Bogliolo said.

“We believe we have substantial growth opportunities to pursue as a geographically-diversified luxury brand and are not distracted by external factors, such as the negative effects of a strong U.S. dollar or fluctuations in tourist spending.”

In the Asia-Pacific region, total sales reached US$294 million in the quarter, a 4 per cent increase compared to the same period last year.

GlobalData Retail managing director Neil Saunders noted that the retailer’s operating income has plummeted 22.9 per cent compared to the prior year to US$114.5 million.

“While this is unfortunate, we believe the outcome is acceptable as most of the cost increases related to higher spending on marketing, new technology and the digital future,” Saunders said.

“These are all prudent areas of investment that Tiffany needs to advance if it is to maintain its success.”

The brand has been successful in recent years in shifting its brand positioning from “old-fashioned and irrelevant” to consumers aged 35 and under, Saunders said.

Tiffany’s said it expects year-on-year global net sales growth to be in the high single-digits, with a net earning per diluted share to be in the range of US$4.65 to US$4.80.

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