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People leave a Tiffany & Co. store in Lower Manhattan on February 6, 2017 in New York City. AFP FILE
NEW YORK – There was something missing from luxury jeweler Tiffany & Co. in recent months: Chinese tourists.
For the second time in as many months, a leading seller of high-end products has noticed that a particularly crucial demographic segment of its shopping center has been thinned, harming sales and fueling fears of a "big deal". a worse.
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 pointed out the same phenomenon of decreasing the number of Chinese tourists. The shares of this company have also been hit hard.
Tiffany is considered a pillar of luxury goods. This is why the shares of Ralph Lauren and Movado also fell on Wednesday, even as the stock market in general has risen sharply.
Tiffany's third-quarter revenue increased 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.
"We do not see a slowdown in Chinese demand. We find that Chinese tourists are traveling less, "Bogliolo said during a telephone interview Wednesday.
In fact, Bogliolo said Tiffany's mainland China business remained strong, with double-digit sales growth throughout the year. In response to this change, Tiffany's is increasing its inventory in its mainland stores in order not to lose any sales.
Bogliolo assumed that the decline in Chinese tourists was due to the decline in the value of the Chinese currency.
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."
While the number of Chinese visitors from China increased by 4% in 2017, according to the US National Office of Tourism and Travel, it was down significantly from the 16% jump recorded in 2016.
This is not a healthy trend for sellers of high-end products.
Burke estimates that 30% of luxury goods sales in the world are destined for Chinese tourists. Dan Jasper, a spokesperson for Mall of America's, the country's largest mall, said Chinese tourists tend to buy more high-end items, including luxury cosmetics, jewelery, clothing and electronic devices. He said the number of Chinese tourists in the center continued to grow at a "modest rate".
On Wednesday, what 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 global luxury sales, estimated at $ 412 billion in just six years, said Bain in his study, which had been prepared for the Italian Altagamma association of upscale 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 has dropped 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.
The slowdown in Chinese tourists has been offset by strong demand from local customers in the North American market, while the luxury goods provider is changing its products and marketing to attract a younger customer.
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. . / cbb
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