(Reuters) - Upscale jeweler Tiffany & Co reported a sharp decline in holiday season sales and cut jobs as it struggles with weak spending by tourists in its showpiece U.S. stores.
The company’s traditional reluctance to offer promotions has been turning away thrifty customers, while a stronger dollar has made purchases more expensive for tourists.
Slowing economic growth in China could pose another headache this year for the company, which gets about 24 percent of its sales from the Asia-Pacific region.
While the economic slowdown in China has not yet permeated to luxury goods, it could take effect in 2016 and that would blow Tiffany off course, said Neil Saunders, chief executive of research firm Conlumino.
Tiffany’s shares, which have lost nearly a third of their value in the past six months, touched a near three-year low of $62.90 in morning trading on Tuesday.
“Weak holiday trends occurred prior to recent worldwide financial market turmoil,” Oppenheimer analysts wrote in a note. “Indications of a further step-down in sales trends are likely to further unnerve investors.”
Tiffany said it expected “minimal growth” in sales and earnings in 2016.
In a bid to expand its appeal to a younger, more style-conscious consumer, Tiffany has been spending heavily on designing and marketing contemporary gold and silver jewelry.
But a 3 percent decline in holiday season sales on a constant currency basis suggested that the company’s efforts were not bearing fruit.
Including the impact of the dollar, Tiffany’s sales fell 6 percent to $961 million in the period.
Comparable sales in the Americas fell 8 percent on a constant currency basis in the holiday shopping period ending Dec. 31.
Comparable sales in Asia-Pacific fell 9 percent on a constant currency basis, hurt by weak demand in Hong Kong and Singapore.
The company said it now expects total earnings to decline by 10 percent for the year ending Jan. 31 versus its previous forecast of a decline of 5-10 percent.
The latest forecast excludes a charge of about 4 cents per share in the current quarter for “staff and occupancy reductions,” the company said in a statement.
“(The job cuts are) definitely not as large as what we’d done at the end of 2008,” spokesman Mark Aaron said, adding that the occupancy reduction was not related to store closures.
Tiffany had offered voluntary retirement incentives to 800 employees in 2008. (reut.rs/1RR0Lsa)
Reporting by Yashaswini Swamynathan in Bengaluru; Additional reporting by Sruthi Ramakrishnan; Editing by Ted Kerr and Saumyadeb Chakrabarty