Tiffany & Co., the world's second-largest luxury jewellery chain, predicted a 30 per cent decline in net income this quarter as currency headwinds and sluggish sales hamper results.
The drop in the first quarter will be followed by a more "modest" decrease in the following period, the New York-based company said in a statement on Friday. Worldwide sales will decline about 10 per cent in the first quarter, partly because of a slowdown in the Americas region, Tiffany said.
The stronger dollar has hit Tiffany with a double-whammy by lowering the value of overseas sales and making it less attractive for foreign tourists to come to the U.S. to shop. As it tries to bounce back, Tiffany has been raising the prices of some jewellery and marketing more entry-level fashion pieces.
"Tiffany is facing challenges from global economic uncertainties, especially from the effect of a strong U.S. dollar," President Frederic Cumenal said in the statement. "As a result, we have adopted a cautious approach in our planning for the coming year."
The shares fell as much as 3.9 per cent to $83 in early trading in New York. The stock had declined 19 per cent this year before the earnings report.
Tiffany had been counting on the U.S. to help offset slowing sales overseas. Instead, the Americas region fell into its own slump during the holidays and will continue to crimp sales in 2015. For the year, the company expects minimal earnings growth from the $4.20 a share it posted last year. Analysts had estimated $4.41 on average, according to data compiled by Bloomberg.
Net income amounted to $196.2-million, or $1.51 a share, in the fourth quarter, which ended Jan. 31. That compares with a loss of $103.6-million, or 81 cents, a year earlier, when an arbitration award to Swatch Group AG increased costs. Analysts had estimated about $1.50 on average for the most recent period, according to data compiled by Bloomberg.
Tiffany also is going through a change of leadership. Cumenal will take over the chief executive officer job on April 1, the company said last year. Current CEO Michael Kowalski will remain on the board as non-executive chairman.
Tiffany ranks second behind Cie. Financiere Richemont SA in global sales of luxury jewellery.