Suddenly, luxury stores are missing Chinese tourists who spend little

NEW YORK – There was something missing from luxury jeweler Tiffany & Co. in recent months: Chinese tourists.

For the second time in several months, a large seller of high-end products has found that a particularly crucial demographic segment of its mall has been thinned, harming sales and fueling fears of a worst.

On Wednesday, Tiffany & Co. shares plunged 12% after posting weaker than expected sales in the third quarter. Managing Director Alessandro Bogliolo said that Chinese tourists did not show up and that they did not open their wallets with the same vigor as in the past.

Last month, the owner of Louis Vuitton noticed the same phenomenon. The shares of this company have also been hit hard.

But Tiffany is considered a major player in the luxury sector and a number of big names, such as Ralph Lauren and Movado, were sold Wednesday, fearing the situation would worsen.

In the third quarter, Tiffany's revenues rose 4% to just over $ 1 billion, but industry analysts were expecting a bigger boost. Part of the surprise was the decrease in the number of tourists, especially Chinese, in New York and Hong Kong stores.

"What we are seeing is that Chinese tourists are traveling less," Bogliolo said during a telephone interview Wednesday.

Tiffany's business in mainland China remains strong, he said.

Bogliolo assumed that the value of the Chinese currency was deteriorating.

The yuan, also known as the renminbi, or "money of the people", reached its lowest level in ten years against the dollar at the end of October. It has slightly strengthened this month, suggesting that Beijing has intervened to curb its slide.

But others see bigger problems at stake, including a smoldering trade war and the potential for a slowdown in the global economy that weighs even on the wealthy in China.

"Our political relations with the Chinese government are very tense," said Robert Burke, a luxury consultant in New York. "It does not put them in the mood to come to the United States to spend their hard-earned money.They have the opportunity to buy in mainland China."

According to the US National Travel and Tourism Board, while the number of Chinese visitors to the United States increased by 4% in 2017, it was down sharply from the 16% jump registered in 2016.

This is not a healthy trend for sellers of high-end products.

Burke estimates that nearly 30% of luxury goods sales are destined for Chinese tourists.

On Wednesday, which may have exacerbated the fears, is that, according to the prevailing wisdom, consumer spending from China in the luxury high-end boutiques of the West would not continue, but that they would increase.

In a study published this month, consulting firm Bain said that Chinese consumers will supply nearly half of the world's high-end sales by 2025.

Chinese buyers will account for 46 percent of estimated global luxury sales of $ 412 billion in just six years, said Bain in his study, which was prepared for the Italian Altagamma association of high-end producers.

Even before the Trump administration intensified its trade dialogue with Beijing, there were signs that economic growth was slowing in China.

China's economic growth slowed to a low of 6.5% after the global crisis compared to the end of September. A trade dispute with the Trump administration is putting pressure on communist leaders for that they are boosting economic activity that has weakened since Beijing put a halt to bank lending l '. last year while he's trying to contain the rising debt.

It is too early to tell if the series of lower-than-expected sales of luxury merchants will continue or if there is a bump on the road.

There were other signs of weakness at Tiffany, such as sales in comparable stores, which are closely watched by industry analysts.

Tiffany's quarterly profit of $ 94.9 million, or 77 cents per share, was actually a dime better than expected, according to analysts surveyed by Zacks Investment Research.

However, the company has maintained its annual earnings guidance of between $ 4.65 and $ 4.80 per share, which has led some to believe that changing geopolitical arrangements or a declining world economy may soon become a more serious threat. .

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Dee-Ann Durbin, Associated Press Business reporter in Detroit, contributed to this report.