The Wall Street Journal-20080112-Tiffany Outlook Is Lowered On Slowing Luxury-Goods Sales
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Tiffany Outlook Is Lowered On Slowing Luxury-Goods Sales
Signaling that the slowdown in sales of luxury goods is broadening, upscale jewelry retailer Tiffany & Co. cut the top end of its profit forecast because of weak holiday sales.
"A recent pullback in U.S. spending likely reflected a more cautious attitude among customers about the near-term direction of the economy," Chief Executive Michael J. Kowalski said. Sales at U.S. stores open at least a year fell 2% in the months of November and December, the New York retailer said. Globally, the picture was rosier: World-wide same-store sales rose 3%, but were up only 1% excluding foreign currency exchanges.
Tiffany shares fell $4.52, or 11%, to $35.80 in 4 p.m. composite trading on the New York Stock Exchange, amid a broad market decline.
The luxury sector has been the retail industry's strongest performer, but there is concern the richest consumers have begun cutting back on spending. Less-affluent shoppers who buy entry-level luxury goods showed signs of cutting back in the fall, triggering warnings that sales growth would slow from companies like Coach Inc., Polo Ralph Lauren Corp., Nordstrom Inc. and Tiffany.
"The old mindset was that the ultrarich were immune to everything, but that mindset is changing," said Pat Conroy, managing principal of the consumer business at Deloitte & Touche USA. "They are a lot closer to the rest of us."
European luxury-goods makers that sell a large chunk of their wares in the U.S. are under pressure, too. Sales at Italy's Luxottica SpA, which sells roughly two-thirds of its eyewear in North America, were slower this year in the three weeks leading up to Christmas. Rising sales in China and other emerging markets are helping to offset weakness in the U.S., he said. Earlier this week, PPR SA, owner of Gucci Group, and Hugo Boss AG rushed to affirm their sales forecasts for 2007.
In its announcement Friday, Tiffany said U.S. sales softened after growing robustly for much of last year. And while its flagship store on Manhattan's Fifth Avenue registered a 10% increase in holiday- period sales, the company said the gain was driven by spending by foreign tourists, whose purchasing power is boosted by the weak dollar. Tiffany expects to report "strong earnings growth" in its fiscal fourth quarter ending Jan. 31, Mr. Kowalksi said.
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Stacy Meichtry contributed to this article.
