Shares of the luxury jeweler dropped 10% in early trading this morning upon the news.
“After achieving very strong and better-than-expected sales and earnings growth in the first three quarters of 2011, sales weakened markedly in the United States andEurope during the holiday season, reflecting restrained spending by consumers for fine jewelry,” said Michael Kowalski, Tiffany’s ceo.
The company posted a 7% increase worldwide to $952 million for the November/December selling period. The biggest increases were seen in Asia-Pacific, up 19% to $165 million and a 13% increase to $160 million in Japan.
Nonetheless, sales in the United States and Europe slowed. Sales in the Americas, which include the United States, grew 4% to $503 million while comparable store sales were up only 2%. And sales at the company’s Fifth Avenue flagship declined 1%.
Sales in Europe rose a mere 1% to $117 million and comparable store sales fell 4%, apparently hurt by a drop off in sales by European consumers who may be concerned about the Eurozone debt.
‘Aspirational’ Shoppers Reduce Spending?
As a result, Tiffany, which ends its fourth quarter on Jan. 31, lowered its full year earnings to be in the range of $3.60 to $3.65 a share, down from its previous guidance of $3.70 to $3.80.
Although Tiffany’s sales have been boosted by expansion into Asia and Europe in recent years, the company’s sales now may be more vulnerable due to foreign currency translations and a weakening picture inEurope, retail analyst said.
About 50% of Tiffany’s sales now come from outside North America, a higher percentage than other U.S. luxury brands such as Coach or Ralph Lauren.
When the company reported its third quarter sales in November 2011, some analysts said they expected a slowdown for the company and more gross margin pressure, too.
Although Tiffany said they sales of its higher-end product were strong, lower priced merchandise, such as sterling silver jewelry “had more modest sales increases.”
Brian Sozzi, retail analyst for NBG Productions, said Tiffany, like other luxurygoods purveyors, maybe having a more difficult time with middle income “aspirational” shoppers.
“The upper middle-income consumer may have found another place to go,” Sozzi said. “They’re not buying $50,000 engagement rings, but they’re looking for items for $350 to $1,000. Those prices are increasingly harder to find at Tiffany, so consumers may be finding them at Macy’s or Bloomingdale’s.”
Tiffany releases its fourth quarter and full year results on March 20.