Neil Saunders, CEO of Conlumino retail research firm, told investors that Tiffany's first-quarter sales decline "tell[s] a tale of a brand that is now finding it more of a struggle to connect with consumers in a way that it once did." This is especially true among affluent younger shoppers, who see the brand as "old world luxury," he said.
Yet Tiffany needs to be careful with its attempts to lure younger consumers. In the 1990s, when its less costly silver jewelry took off with teenagers in Japan, the company's older customers were turned off by the brand. To restore its image, the blue-box brand started raising prices on these pieces.
Like other luxury players, Tiffany's first-quarter results were dented by a global slowdown in high-end spending and a stronger U.S. dollar. These trends contributed to its worst comparable-sales performance in nearly seven years. The company expects external headwinds to continue during the second quarter, and as such, slashed its guidance for the period. Management now expects the retailer's adjusted earnings per share to fall roughly 15 percent, compared with prior guidance of a 5 percent drop.
"Management cited 'numerous challenges, including continued pressure for foreign tourist spending,' which makes it difficult to have much confidence in a second-half turnaround," Citi's Lejuez said.