An increase in wholesale sales of diamonds, strong growth in e-commerce sales and new store openings help Tiffany & Co. beat earnings estimates despite the fact that same-store sales declined for the seventh straight quarter. For the second quarter (ended July 31, 2017), the renowned luxury retailer reported a 9% rise in net income to $115 million, up from $105.7 million during the same period a year earlier, on net sales of $960 million. Analysts had expected the company to earn revenue of $930.3 million. However, same-store sales, a key retail metric, dropped 2%, compared to analysts’ estimates of a 1% decline. Only Japan saw an increase, while comp sales in North America, Tiffany’s largest market, fell 1% due to lower tourist spending and weak demand across categories other than fashion and designer jewelry. Net earnings rose 8% to $208 million, or $1.66 per diluted share, from $193 million, or $1.53 per diluted share a year ago.
The Japanese market, which accounts for nearly 15 percent of Tiffany’s total revenue, delivered sales results 3% higher than previously. The company declined to blame disruption at its New York flagship store for soft sales in North America. According to Mark Aaron, director of investor relations of Tiffany & Co., the NYC flagship has, “returned to a relatively normal flow of customer traffic following a post-election disruption.” In Europe, total sales rose by 3% to $114 million. Michael J. Kowalski, Chairman of the Board and Interim Chief Executive Officer, said, “While net earnings rose in the first half, we remain determined to drive comparable store sales growth and stronger, sustainable earnings growth through a continued focus on product design innovation in jewelry and luxury accessories, further optimization of our store base, more impactful marketing communications and highly effective customer engagement both in-store and online."
As Pan Kwan Yuk writes for Financial Times, "The results underscore the challenges that newly appointed chief executive Alessandro Bogliolo will face in turning around the company’s store sales when he starts in October. Tiffany has been through a series of upheavals over the past year, as it struggles to revamp its brand to capture younger customers. In recent quarters, sales were hit by weak tourist spending, the strong dollar, as well as the drop off in foot traffic at its flagship store on Fifth Avenue in New York following Donald Trump’s election as president."