“Any move by Chinese consumers can have a negative impact on the company’s sales and profitability.” Tiffany’s warning in a securities document earlier this year seems to be fulfilling.
After a brief recovery in the second quarter, American luxury jewellery brand Tiffany & Co. (TIF.NYSE) failed to continue the positive trend. In the third quarter ended Oct. 31, Tiffany’s revenue increased 4% year-on-year to 10.1. Billion dollars, Soufeel Coupons comparable sales increased by 3%, but not as much as analysts expected 5.3%.
During the reporting period, Tiffany’s gross profit margin was 62.2%, operating profit fell 23.1% year-on-year to US$126 million, and net profit decreased 7% to US$94.9 million compared with US$102 million in the same period of last year, while the brand was in the second quarter. The increase in net profit once recorded a high of 27%.
In the first three quarters of this year, Tiffany’s sales increased 10% year-on-year to US$3.12 billion, and net profit surged 23.3% to US$380 million. Among them, the income of classic jewellery products increased by 8% in the third quarter, the income of the first three quarters increased by 15%, the income of wedding jewellery products increased by 2% and 7% respectively, and the sales of designer jewellery products decreased respectively. 8% and up 3%.
Thanks to an effective younger strategy, Tiffany is returning to the embrace of US consumers. Although some sales growth was offset by lower Chinese tourists’ consumption, the sales performance of the brand in the Native American market improved compared with the same period of the previous year. , an increase of 5% to $ 442 million, sales in the first nine months increased by 7% to $ 1.3 billion.
In the European market, Tiffany’s third-quarter sales totaled $114 million, with sales for the first nine months of $343 million, up 3% and 6% from the same period last year, and comparable sales by 3%.
In the Asia-Pacific market, including China, Tiffany’s third-quarter sales rose 4% to $294 million. Sales in the first nine months increased 19% to $923 million. Revenues in the Japanese market rose to 2% and 10% respectively. To $142 million and $447 million.
As of the end of the reporting period, Tiffany added 9 stores and closed 3 stores. Currently, there are 321 stores worldwide.
CEO Alessandro Bogliolo said in a post-conference conference call that the third-quarter brand’s revenue performance and comparable sales were less than expected, mainly due to the weakening of Chinese tourists’ desire to consume in markets such as the US, Japan and other parts of the Asia-Pacific region.
Previously, due to the differences in the pricing of luxury brands in different markets due to taxation, Chinese consumers will spend two-thirds of their expenditure on overseas travel, but with the lowering of the RMB exchange rate, the reduction of domestic import tariffs and the policy of strict purchasing. This most optimistic consumer group is more willing to buy luxury goods in the local market.
JPMorgan analysts pointed out that the Golden Week holiday in early October was the best time for major brands to compete for Chinese consumers, but South Korea, one of the main tourist destinations, did not receive the expected traffic. The first day of the holiday, Incheon Airport, South Korea The number of Chinese tourists has fallen by 10% year-on-year. Burberry is one of the most influential luxury brands to go to South Korea. There are data showing that 8% of its annual revenue in the Korean market comes from Chinese tourists.
In addition to Tiffany, Luk Fook Jewellery’s first-half financial results disclosed today were also affected. In the first three weeks of October-November, its same-store sales in Hong Kong and Macau in China also recorded single digits due to reduced visitor spending. Decline.
The reduction in price sensitivity and the pursuit of “timely access” by Chinese luxury consumers is also the reason for their reduced shopping spending when traveling overseas. Erwan Rambourg, head of HSBC’s consumer and retail research department, believes that under the premise of stable GDP, Chinese consumers’ demand for luxury goods is more related to the concept, rather than GDP growth rate or tariff changes. After all, price is just a basic part of luxury brands, and the concept of “luxury” in the minds of a new generation of Chinese consumers is being redefined.
However, some people in the industry believe that luxury brands do not have to worry too much. Alessandro Bogliolo also stressed that Chinese consumers are the most important growth driver in the global luxury goods industry. The average customer price of this group in Tiffany far exceeds that of consumers in the US, Europe and even Japan. It is crucial for the future development of the brand.
According to Alessandro Bogliolo, the demand for luxury goods by Chinese consumers is not slowing down, but will gradually flow to the Chinese domestic market. “We can speculate on the reasons for the decline in local tourists’ spending outside of China, but the actual situation is that sales in mainland China continue. Strong growth is enough to prove that the Tiffany brand is still attractive to Chinese consumers,” he said in a conference call.
To meet the rising demand of Chinese local consumers, Alessandro Bogliolo revealed that Tiffany is transferring more inventory to China. He believes that compared with the current luxury brands should pay more attention to long-term sustainable development, whether in the local or global consumer market from China is still full of potential.
The recent report published in the industry also supports Alessandro Bogliolo’s point of view. Bain’s 2018 Luxury Market Research report shows that between 2015 and 2018, Chinese consumers’ purchases of luxury goods in China increased twice as much as overseas consumption, and their share of global spending continued to rise. Currently estimated to account for 33% of global luxury spending, up from 32% in 2017, while the proportion of luxury goods sales in mainland China has also increased from 8% last year to 9%, 2025 Chinese consumers will occupy the global luxury Nearly half of the market share.
McKinsey’s latest report also pointed out that the annual consumption of Chinese luxury consumers exceeds 500 billion yuan, accounting for nearly one-third of the global luxury goods market. Among them, the younger generation of China’s post-90s has become an increase in the purchase of luxury goods. Consumer groups.
It is worth noting that in August this year, Tiffany and Tmall cooperated for the first time to open a dedicated flash shop, and launched the new Tiffany Paper FlowersTM flower series in China. This is the first time the brand has released new jewelry through online platform.
The reduction in Chinese tourist spending is only a macro factor for luxury brands, and the continued fluctuations in Tiffany’s recent share price performance have also worried investors. Some analysts said that Tiffany’s product design reforms also face the risk of losing some of the original high-end consumer groups.
In this regard, Alessandro Bogliolo admits that Tiffany’s performance and stock value fluctuations may be confusing, but the brand’s rejuvenation reform is not blindly overthrowing everything, but from product design to creative marketing around the core of the brand.
In October 2017, the board of Tiffany was determined to carry out a more radical reform of the group’s business, appointing former Bulgari executive Alessandro Bogliolo as CEO, expecting him to bring more recognizable designs to the brand and impress more millennials. A generation and bring value to shareholders.
Tiffany’s stock price volatility in the past year has worried investors
Looking back over the past year or so, Tiffany’s product portfolio and marketing approach has continued to diversify under the leadership of Alessandro Bogliolo, starting with the first fragrance in 15 years last October and the Fifth Avenue flagship store in New York in November. Opened the world’s first cafe Blue Box Café.
On the eve of last year’s Christmas holiday season, Tiffany has become a hot topic in Chinese social media with high-priced home products such as pins and yarn balls of nearly 10,000 yuan. The brand WeChat search index once soared to 245.42%, successfully creating a “net red”. The second peak after the cafe.
As far as the consumption scene is concerned, as the brand concept centered on engagement rings and wedding culture is outdated, Millennials are more respectful of self-reward and “reward culture”. The opportunity to purchase luxury jewelry products will be more than just key time points such as engagement. .
In addition, Tiffany also adjusts the proportion of products to provide products for a variety of occasions for Millennials, such as the first jewellery series Paper Flowers by the new chief design officer Reed Krakoff in May this year, and the new Tiffany BlueBook 2018 Jewelry, as well as the previously launched T-series jewelry.
Tiffany’s product portfolio and marketing approach continues to diversify under the leadership of Alessandro Bogliolo
Tiffany’s products are currently priced between $200 and $1 million, ranging from everyday fashion jewellery to high-end wedding collections. It is reported that Tiffany will launch a new series every two or two years in the future, which is higher than the previous three or four years to launch a new series of frequencies to meet the freshness needs of young consumers.
The initiative to include same-sex couples in the consumer community is seen as the most correct thing Tiffany has done in recent years. Earlier, the brand launched a highly acclaimed engagement advertisement for same-sex couples. They found a pair of real-life same-sex couples in real life to play the ad with the theme of “Love Without Borders” and then launched a The simple, non-drilling new products that match it have won the youth market for this group.
In July of this year, Tiffany opened the world’s first new Style Studio retail concept store in London, with a store area of approximately 200 square meters, adjacent to the luxury retail business district Covent Garden. A Tiffany spokesperson said that Style Studio has changed the image of a traditional jewelry store. The store staff does not need to wear formal attire, and can wear and match jewellery products according to their own preferences. The store also has a Tiffany’s latest perfume, live-carved jewellery and Vending machines for leather embossed products.
In order to continue the dream image in the eyes of consumers, Tiffany’s latest holiday season commercials specifically set the theme as “Believe in Dreams Blooming Dream”, and invited fashion icon Zoë Kravitz, Chinese supermodel Xiao Xiaowen, Naomi Campbell, Karen Elson Waiting for the joint performance.
However, as the most representative luxury jewelry brand in the United States, Tiffany also faces the challenges of European luxury brands such as Bulgari and Cartier, and most of its competitors are backed by luxury giants such as Kaiyun, Lifeng and LVMH. Last month, Louis Vuitton also appointed former Tiffany executive Catherine Lacaze as the new head of the jewelry business.
Alessandro Bogliolo thinks this is a good thing. In contrast, Tiffany’s brand culture is more inclusive and low-key. “European jewelry brands tend to be too formal and formal, and Tiffany’s product design will be more diverse and flexible. .”
Surprisingly, in the face of the fierce impact of the online market, Tiffany made a bold decision in August this year, will spend $ 250 million to invest in its flagship store on the corner of Fifth Avenue and 57th Street in New York. Renovation, the flagship store’s annual revenue accounted for 10% of the company’s total sales. Alessandro Bogliolo described Tiffany’s new flagship store as a jewellery palace. “When consumers walk from one end of the store to the other, they will feel the balance of Tiffany’s inner balance.”
Due to the increasingly complex market environment, Tiffany is still conservative in its forecast for FY18, with a single-digit growth in revenue for the full year, with earnings per share ranging from $4.65 to $4.80, which is less than analysts’ expectations of $4.83.
For Tiffany’s third-quarter performance, which is lower than market expectations, analysts believe that the brand may be resolved from two aspects. One is to open more stores. Tiffany also revealed in the financial report that it plans to increase globally this year. With 10 stores, Tiffany may increase its investment in creativity and innovation and strengthen the uniqueness of its products to enhance its appeal to high-end consumers.
Naveen Jaggi, president of Jones Lang LaSalle’s retail consulting services and capital markets, pointed out that the global luxury fashion retail environment continues to be unstable, and Tiffany needs to remain vigilant. After all, American luxury brands such as Tory Burch and Michael Kors have been adding high-end jewelry since this year. The accessories market is trying to get a piece of the cake.
What’s more, when Tiffany stumbled and continued to move forward, Pandora, the biggest black horse in the jewellery industry that had been “sleeping” more than a year ago, suffered a transformational pain this year.
In the three months ended September 30, Pandora’s third-quarter revenue decreased by 3% year-on-year to 4.98 billion Danish kronor, or about 762 million US dollars, and the profit before interest, taxes, depreciation and amortization was 37.8% from the same period of the previous year. Reduced to 29%, net profit of 951 million Danish kronor, about 145 million US dollars.
Due to disappointing results in the third quarter, Pandora lowered its guidance on annual revenue growth and profitability, expecting full-year sales growth of 2% to 4%, and canceling the previously proposed 7% to 10% long-term Annual income growth forecast.
According to a Pandora spokesperson, the brand is currently implementing a transformation and restructuring plan called “NOW”, with a focus on further reducing operating costs and increasing investment in sustainable development strategies. Some foreign media quoted sources as saying that if the performance does not improve, Pandora will be acquired by US private equity funds.
It is undeniable that as the global economic uncertainty increases, the Chinese consumer’s life-saving straw is always driving the entire luxury industry.
In October of this year, the news of China Customs’ strict purchase of purchases triggered the sell-off of luxury retailers’ stocks on both sides of the Atlantic. The market value of parent companies such as Louis Vuitton and Gucci evaporated by 20 billion in one day.
Luca Solca, head of the luxury division of BNP Paribas, said that the growth rate of the luxury goods market in the second half of 2018 may rise in low units. Hermes CEO Axel Dumas said the group is closely watching China’s stock market and real estate market, as any changes in high-end customer assets may affect the group’s performance.