Tiffany & Co. rose the most in more than three months after improving sales in China and Japan signalled that the worst of the global luxury market’s downturn may be over.
Better-than-expected earnings followed upbeat reports from LVMH Moët Hennessy Louis Vuitton SA and Kering SA, the owner of Gucci. Still, not everyone in the industry is optimistic. Richemont SA, the maker of Cartier jewellery, reported a 51-per-cent drop in first-half profit this month, and Swiss watch exports are suffering their worst slide in seven years.
Tiffany had been contending with weaker spending in Asia and slower tourism after terrorist attacks in Paris. The jeweller responded by introducing more products and trying to keep its costs and inventory in check.
“The results are definitely better,” said Seema Shah, an analyst at Bloomberg Intelligence. “It’s a good sign.”
The shares climbed as much as 8 per cent to $84.40 (U.S.) in New York, the biggest intraday gain since Aug. 25. The shares closed Tuesday at $80.60, up $2.46 or 3.2 per cent. Tiffany has advanced 5.7 per cent this year.
Earnings were 76 cents a share in the period ended Oct. 31, the New York-based company said on Tuesday. Analysts projected 68 cents, on average. Tiffany maintained its forecast that earnings a share would decline by a mid-single-digit percentage this year and that global net sales would fall by a low-single-digit percentage.
While earnings have improved, Tiffany is remaining cautious because of “highly volatile” global economies and the increased security around New York’s Trump Tower, which may hurt the company’s adjacent Fifth Avenue store, chief financial officer Mark Erceg said on a conference call. Next year’s elections in Hong Kong, one of Tiffany’s largest markets, also may weigh on tourism and spending, he said.
“We’d like to see several quarters of sales acceleration before making any conclusion about turning global luxury spending,” Mr. Erceg said.
Revenue rose 1.2 per cent to $949.3-million last quarter, topping analysts’ $922.6-million average estimate. Sales at the company’s stores open for more than 12 months fell 3 per cent on a constant-currency basis. Analysts had projected sales by that measure would slip 4.1 per cent.
Tiffany’s Asian divisions led the gains, with net sales in the Asia-Pacific unit climbing about 4 per cent to $247-million, driven by double-digit growth in China. Revenue in the Japan division increased 13 per cent to $150-million, helped by the strengthening yen.
In the Americas, net sales dropped 2 per cent. Tiffany said that its flagship New York store has experienced “adverse” traffic effects and “continued sales softness.” The division has also been pressured by lower spending from local consumers because of the domestic economic and political uncertainties, chief executive officer Frederic Cumenal said on the conference call. However, the Americas did see a gain in tourist spending, he said.
Sales fell 10 per cent in Europe, the company’s worst regional performance. Europe’s luxury industry has been grappling with a slowdown caused by sluggish demand from Asian travellers, as well as recent terrorist attacks. Britain was the bright spot in the region: Tourists increased their spending to take advantage of a weaker pound after the country’s decision to leave the European Union. Tiffany recently increased prices by single digits in Britain to partly offset the effect of the softening currency.
Despite the early signs of a rebound, risks remain for Tiffany, Bloomberg Intelligence’s Ms. Shah said. The company could be hurt if the Trump administration decides on a more closed economy, she said.
“I’m still a little concerned about the Americas,” she said. “I don’t think the global headwinds have subsided.”Report Typo/Error