China’s Tourism Lull Tarnishes Tiffany’s Stock

The stock may have rebounded a bit, but the news may linger – and may portend some speed bumps ahead for Tiffany & Co.

Shares for the luxury retailer were down double digits on Wednesday (Nov. 28) after the jewelry giant posted mixed results for the September quarter. The headline numbers showed a top line of $1.01 billion, which was below the Street at $1.05 billion. Shares recently changed hands at $91, down from $105 earlier in the week.

Same-store sales were up 3 percent year over year, and that was below the more than 5 percent that had been expected by the Street. Europe’s same-store sales, as reported by CNBC, were off 3 percent, and Japan’s tally was up only 1 percent.

But as noted by The Japan Times, Tiffany & Co. CEO Alessandro Bogliolo said that in the wake of the earnings announcement, Chinese tourists have been spending less time abroad, which has had an impact on global retailers. The site noted that the Tiffany observations come in the wake of disclosures from the owner of Louis Vuitton, LVMH, that sales from the segment have suffered.

This week, Tiffany cited “lower than expected spending in the third quarter, attributed to Chinese tourists in the U.S. and Hong Kong and lower wholesale travel-retail sales in Korea.”

“We don’t see a slowdown of demand by the Chinese. What we see is that Chinese tourists are traveling less,” said Bogliolo in a phone interview, as cited by The Japan Times. Sales in mainland China were up double-digit percentages, and so the company is boosting inventory there, which may help with sales. China’s currency has been losing value against other denominations, which in turn may be impacting tourists’ spending habits amid the trade war.

As one consultant, Robert Burke, told the publication, “there are major strains in our political relationship with the Chinese government. It doesn’t put them in the mood to come to the U.S. to spend their hard-earned dollars. They do have the option to buy in mainland China.” That reluctance comes as, he estimated, roughly 30 percent of luxury goods sales come from Chinese tourists opening up their wallets.

Earlier this month, Bain estimated that Chinese shoppers will account for as much as 46 percent of $412 billion in luxury goods sales by 2025.