Wooing the wealthiest Americans is starting to pay off for Tiffany & Co (TIF).
The New York luxury jeweler reported better-than-expected quarterly results on Wednesday. One of the biggest reasons why: Wealthy U.S. shoppers snapped up its priciest jewelry. That helped Tiffany offset the effects of a strong dollar on sales to tourists in U.S. stores, along with soft sales of less-expensive jewelry.
Tiffany, with its robin-egg blue boxes and a place in U.S. pop culture thanks to Audrey Hepburn, has always been associated with luxury. But in the past few years it has really ramped up efforts to cater to the very affluent, competing with the likes of Harry Winston.
About two years ago, Tiffany established a separate unit to cater to wealthy clients around the world who covet its high-end “statement” jewelry — one-of-a-kind or few-of-a-kind pieces priced at $50,000 or more. The aim was to snag a bigger share of the ultra high-end market. (Indeed, a $95,000 price tag on a diamond necklace in platinum does make a statement.)
Last month, Tiffany put on a “Blue Book” event in New York, hosting select A-list customers from around the world to see its new couture collection of fancy jewelry with the theme, ‘The Art of the Sea.’ “It was a truly memorable and successful event,” Mark Aaron, Tiffany’s vice president of investor relations, told analysts on a conference call.
Tiffany is also getting traction with its Tiffany T collection — a new-ish line of jewelry meant to boost its credibility in the fashion world and drive up sales of items women buy for themselves rather than wait (possibly in vain) to get as a gift. The collection, the first by Francesca Amfitheatrof, the star design director Tiffany hired two years ago, features items like a $15,500 diamond line bracelet in 18k white gold.
But at the other end of Tiffany’s price spectrum, business has been less lustrous, particularly in “entry-level” silver jewelry price points, or items less than $500. Most people associate Tiffany with high-end, pricey jewelry. But less-expensive categories account for 25% to 30% of sales and offer higher gross margins that the ultra-luxury items.
“We continue to experience weakness in silver jewelry sales below $500,” Aaron said. “We are focused on addressing this issue over the balance of the year through product development and advertising targeted at what we call our little luxuries.”
This split between high-end and low-end sales echoes broader U.S. retail spending trends, as embodied by recent lackluster quarterly reports from the likes of Wal-Mart Stores (WMT) and Macy’s (M), in contrast to strong numbers from Nordstrom (JWN) and Neiman Marcus.
U.S. retail sales were unchanged in April, the Commerce Department reported recently, falling short of economists’ forecasts and stumping experts who thought low gas prices and a better job market would spur spending. At the same time, Bain & Co said last week it expected luxury goods sales in the United States to rise as much as 3% this year after a strong start.
Tiffany’s game plan may prove to be a sound strategy.
