Managing Asia

Managing Asia

Luxury jeweler Tiffany remains hopeful on Europe

Keeping the sparkle in Tiffany
Keeping the sparkle in Tiffany

Despite a slowing economy and simmering political uncertainty, Europe still presents opportunities for robust growth, the chief of America's biggest jeweler Tiffany & Co. told CNBC.

"The 'Tiffany' brand is significantly underdeveloped in Europe and I'm optimistic about fixing [that] because there are lots of opportunities," Michael Kowalski, the company's chairman and CEO, told "Managing Asia."

New York-based Tiffany operates 292 stores worldwide, with 39 in European markets, compared with 122 shops in the U.S. and 128 in Asia-Pacific.

"In Europe, we are the new kid on the block," Kowalski said even though the company has had a presence on the continent for 25 years. "That gives us great opportunities to take market share. We plan to gradually increase our store presence," the 61-year-old said.

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That includes opening its first wholly-owned retail store in Moscow earlier this year, though some industry watchers are questioning the decision as Russia's economy teeters on the edge of recession. This week, the Russian ruble tumbled against the greenback, driven by a slide in oil prices and Western sanctions over its role in the Ukraine crisis.

While the ruble's collapse is worrying, Kowalski is determined to stay for the long haul. Earlier this month, the 177-year-old jewelry giant announced plans for a second store in Russia, which is scheduled to open in early 2015.

"A weakening ruble amid a stronger dollar is something problematic, [but] these are short term political factors. We will go ahead with our plans [as] there's the belief that over the long term, it will make good economic sense," he said. "Russia is an important luxury market where we must have a presence."

Pedestrians walk past a Tiffany & Co. store as it stands illuminated at night in Shanghai, China.
Tomohiro Ohsumi | Bloomberg | Getty Images

Hopes in Asia

Apart from Europe, the world's second-largest jewelry retailer by sales also aims to improve its luster in emerging Asia, where demand for gold and gems appears to be insatiable.

While Americans and Japanese remain the high-end brand's biggest customers, their share of sales has fallen to a combined 62 percent, from over 80 percent a decade ago. Asian shoppers, excluding Japan, now account for 23 percent of Tiffany's total net sales. The company's jewelry sales have more than doubled to $4 billion over the past 15 years.

China, where the Nasdaq-listed firm owns 24 stores and plans to open three a year for the foreseeable future, is the biggest sales generator. But Tiffany is not forsaking Japan.

"While we are wildly enthusiastic about China, we don't want to put all our eggs in one basket. We are very cognizant of geographic balance," Kowalski, who graduated from the University of Pennsylvania and holds an M.B.A. from the Harvard Business School, told CNBC.

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As Japan's economy continues to struggle with the impact of a consumption tax hike to 8 percent from 5 percent in April, Tiffany remains optimistic about the world's third-largest economy.

"We are starting to see a rebound [in sales], though slower than we would have hoped. On the other hand, sales prior to the increase [in sales tax] were astonishing. It certainly creates a challenge for planning," Kowalski said.

In the first quarter, Tiffany's total sales in Japan surged 20 percent on-year to $174 million, on the back of exceptionally strong customer demand in March. After the April sales tax hike, sales in the second quarter declined an 13 percent from the year-earlier period to $119 million.

"We don't think of Japan as a mature market, for it still has substantial potential growth," Kowalski added. "In fact, we often say we learnt how to be a global company there because it's our first market outside the U.S."