There was something missing at the luxury jeweler Tiffany & Co. in recent months: Chinese tourists.
While the company said Wednesday that third-quarter revenue rose four per cent to just above $1 billion US, industry analysts were anticipating a bigger boost. Some of that unexpected drag has occurred as tourists, particularly Chinese tourists, pull back on spending in places like New York and Hong Kong.
Company shares plunged nine per cent at the opening bell Wednesday and there is some concern that sales at Tiffany are a dark omen for the entire luxury retail sector.
But it’s not the first company selling luxury goods to notice.
Last month, the owner of Louis Vuitton noted the same phenomenon. Shares in that company were hit hard as well.
Chinese economy slowing
Chinese economic growth declined to a post-global crisis low of 6.5 per cent in the quarter than ended in September. A trade fight with the Trump administration is pressuring communist leaders to energize economic activity that has weakened since Beijing clamped down on bank lending last year as it tries to rein in surging debt.
There was greater spending at Tiffany by local customers in all regions during the quarter. That, however, was partly offset due to lower spending by foreign tourists, primarily Chinese.
While Tiffany experienced strong sales growth in mainland China, CEO Alessandro Bogliolo said that there was weaker-than-expected spending by Chinese tourists in the U.S. and Hong Kong.
Tiffany earned $94.9 million, or 77 cents per share, in the quarter, a penny better than expected, according to analysts surveyed by Zacks Investment Research. The company earned $100.2 million, or 80 cents per share, a year ago.
Tiffany stuck to its full-year earnings of $4.65 to $4.80 per share.