Last week, Tiffany & Co. found itself at the center of a social media firestorm after posting an image on Twitter of a woman covering one eye with her hand, leading to accusations that the jeweller supports the Hong Kong protesters and prompting Tiffany's to remove the post. Angry Chinese consumers believed it deliberately evoked a symbolic pose adopted by Hong Kong’s pro-democracy demonstrators after a woman was shot in the eye with what protesters say was a police beanbag round during violent clashes with police. Her image later popped up in many posters and memes.
A Tiffany’s spokesman said the image was created in May - before the protests erupted - and “in no way intended to be a political statement of any kind," he said after the company deleted the tweet. “We regret that it may be perceived as such, and in turn have removed the image from our digital and social media channels and will discontinue its use effective immediately,” but the damage had already done in this highly sensitive situation. The company has warned investors that it would be hurt by the drop in tourism amid the protests in Hong Kong, its fourth-largest market by sales. But Mainland China is a much larger market, and the company has been pushing to expand its presence there, so the decision to delete was obvious.
Chinese sensitivities concerning any international sympathy for the Hong Kong protesters have led many brands to walk back what might be perceived as support. In another high-profile firestorm last week, a tweet from the general manager of the National Basketball Association's (N.B.A.) Houston Rockets prompted a backlash in China. Here as well, the N.B.A. quickly moved to smooth things over in a lucrative market that generates millions of dollars in revenue. The league said it was “regrettable” that many Chinese fans were offended by the comment. CCTV, China’s state broadcaster, said it would suspend broadcasts of the N.B.A.'s preseason games played in China, and perhaps all preseason games.
The protests as well as the punitive reactions of Chinese consumers and officials obviously reach far beyond their social media backlash. As Reuters recently reported, global luxury brands "from Prada to Cartier" are expecting to pay a heavy toll as a result of four months of unrest in Hong Kong that has kept tourists away and forced shops to shut (although LVMH apparently has not - see below). And while their impact on bottom lines is still uncertain, upcoming financial results are set to reveal the scope of the damage. Hong Kong accounts for between 5% and 10% of the estimated $285 billion annual global sales of luxury goods, according to Bernstein analysts. But, as Reuters pointed out, recent data shows that retail sales had fallen 23% in August from a year earlier - the biggest decline on record - while the value of sales of jewelry, watches and other valuable items decreased by more than 47%.
Reuters cites RBC analyst Rogerio Fujimori, who estimates most brands will suffer sales declines of between 30% to 60% in the third quarter. Bain & Co now sees the global luxury sector growing this year at the low end of the 4% to 6% range, said analyst Claudia D’Arpizio. "Watchmakers in particular are likely to be hurt – Hong Kong is a major center for high-end timepieces – and Switzerland’s Swatch Group and Cartier-owner Richemont rely on Hong Kong for 11 to 12% of their global sales."
Despite the words of caution, on October 9 LVMH Moët Hennessy Louis Vuitton, a leading luxury products group, released its Q3 results, reporting a 17% increase in revenue compared to the same period in 2018, reaching €13.3 billion in the third quarter of 2019, with its Watches and Jewelry product group recording organic revenue growth of 4%, driven by jewelry. "The United States and Europe saw good progress in the third quarter, as did Asia, despite the difficult context in Hong Kong."