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Tiffany & Co. is falling apart.
The luxury jewelry chain has reported dire earnings for the first quarter of fiscal 2016. Worldwide sales dipped 7%, and comparable sales tanked 9%. That comes on the heels of a dismal fiscal 2015, whose fourth quarter was plagued by a poor gifting season.
Analysts say Tiffany is making one mistake: selling the same old products to consumers who demand constant newness and fresh offerings.
“When you look across retail over the past year … you think about the Ross and TJX doing really well … the higher end is more difficult … the department stores are struggling,” Edward Jones analyst Brian Yarbrough told Business Insider. “I do think you have a younger consumer that wants a freshness, wants newness, doesn’t want the same thing [as] everyone else. That’s why they like a Pandora, [where] they can put a thousand trinkets [on their bracelets]. In Tiffany, you don’t have that.”
Young consumers have been conditioned to the speed and price of fast fashion. In addition to Pandora, look no further thanBaubleBar, therapidly growing fast-fashion-esque jewelry startup.
Yarbrough said Tiffany & Co. could be resting “on their laurels” while still raising prices – something that ultimately doesn’t bode well for the company.
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Tiffany & Co. has tried to rectify this problem with newer, more fashion-driven collections, as Neil Saunders, CEO of the consulting firm Conlumino, pointed out in a note to clients last quarter, but the brand then faces another problem: Even older customers aren’t buying it. Yarbrough points to how consumers are instead spending money on “bigger-ticket items” like houses and cars.
The company is blaming a variety of factors for its downturn, and it says it is working to fix its problems.
“As expected, this was a difficult quarter in terms of both sales and earnings growth,” CEO Frederic Cumena said in a release. “We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the US, and Asia, particularly in Hong Kong.
“However, we are continuing to take actions that are intended to strengthen sales growth with local customers in the US and around the world. From a strategic perspective, we believe that our initiatives will enhance our ability to provide our customers with extraordinary products and experiences and ultimately contribute to improved financial results. We remain focused on generating sustainable long-term sales and earnings growth.”
Yarbrough believes that these issues won’t be abated this year, though he believes the company will eventually bring people back into its stores. In the meantime, however, things look grim.
“Their numbers have gotten worse and worse …. when I went back and looked, I don’t think we’ve seen numbers this bad since the economic downturn,” he said.
For now, Tiffany & Co. might just need to figure out how to appeal to the bulk of consumers.
“The main issue, however, is one of brand image,” Saunders wrote in a recent note to clients. “Tiffany needs to reconnect with consumers and make itself relevant.”