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Here’s Why Tiffany & Co. is Losing Its Sparkle

Grand Opening Of Crystals At CityCenterGrand Opening Of Crystals At CityCenter
Shoppers at the Tiffany store in Las VegasPhotograph by Ethan Miller—Getty Images

Tiffany & Co’s iconic flagship store on Fifth Avenue in Manhattan is one of the most popular destinations for international tourists visiting New York.

That’s long been a boon for the jeweler. But these days, with the U.S. dollar at very high levels, the store’s reliance on foreigners is proving to be a drag on its results.

Tiffany (TIF) on Tuesday reported a 6% decrease in comparable sales in the Americas, which account for more than half of its business, and lowered its full-year forecast, saying it now expects its annual profit per share to drop 5% to 10% from last year.

“We once again saw a substantial decline in sales to foreign tourists in varying degrees by nationality, with pronounced weakness in the New York area,” Mark Aaron, Tiffany’s vice president of investor relations, told analysts on a conference call.

The Fifth Avenue store, in the heart of the city’s luxury shopping district, generates about 8% of company sales, and some 40% of revenue at the store comes from international customers. But perhaps of greater concern, Tiffany said the pressures on its business weren’t limited to tourists in New York.

Indeed, sales to U.S. customers were flat, a result that echoes tepid numbers at Nordstrom (JWN), which recently reported a meager 0.9% increase in comparable sales last quarter, as well as Neiman Marcus and Saks Fifth Avenue, suggesting that the luxury sector is being hurt by the volatile stock market and macro-economic concerns in the U.S.

Laurent Vasilescu, a Macquarie analyst, says Tiffany’s lower U.S. sales point to “a larger luxury issue,” according to Bloomberg News.

Tiffany’s challenges extend beyond the very high end. The jeweler gets about a quarter of its sales from less expensive silver jewelry pieces that cost less than $500. The company is trying to rev that business up, recently introducing a new line called “Return to Tiffany.”

Still, Aaron spoke of “continued softness in broader consumer spending trends.”

Elsewhere, Tiffany’s results held up well, notably in China, whose stock market has been pressured, raising fears of a pullback on luxury spending. And the Chinese are still spending when traveling abroad, something that is limiting the pinch of Tiffany’s U.S. concerns.