It’s all doom and gloom lately when it comes to China and consumer demand for Western products there.
Yet for all the expectations that the devaluation of the yuan and stock market meltdown this month would slam spending, one Western retailer says so far so good and is going full steam ahead with its expansion plans: Tiffany & Co (TIF).
The New York-based jeweler has placed a big bet on China as a source of growth, looking to carve a space for itself alongside other Western brands in what is now the No. 2 luxury market in the world, after the United States. That has meant opening stores in China, but also catering to Chinese people traveling abroad, where many prefer to shop anyway.
In the three months ended July 31, Tiffany’s sales in China rose by a double-digit percentage and opened two more stores there, in Shanghai and Hangzhou, bringing its China store count to 30, out of 304 total for the company. Granted, that was before the Chinese market’s meltdown, but still, the company says it is staying the course with its China plans.
“With regard to recent news from China, in the same that it’s not possible to quantify the positive wealth effect from a rising stock market on our sales growth there in the past couple of years, it’s similarly difficult to predict any negative effect,” Mark Aaron, vice president of investor relations told Wall Street analysts on a conference call.
Any weakness in China seemed to be concentrated in Macau and Hong Kong, not the mainland. Tiffany also believes that the sluggishness could be coming from Chinese tourists spending their money elsewhere.
Tiffany’s comparable sales in Japan, its second biggest market, rose 21% in the quarter, thanks to a spike in tourism spending, particularly by Chinese visitors. Foreign tourism similarly boosted Tiffany’s business in Europe, helping it mitigate a pullback by locals.
While Tiffany’s results took a beating in the quarter partly because of the strong U.S. dollar, which hurt sales to tourists at home (about 8% of company sales come from its Fifth Avenue flagship, a major tourist destination), the company is taking the long view with its international business, which includes opening new stores in China.
“Tiffany remains focused on the long-term growth opportunity to serve Chinese consumers, both locally and globally, and we have not, in any way, altered our strategies,” Aaron said.