Tiffany’s Sales Are Falling Off a Cliff

May 25, 2016, 3:54 PM UTC
A shopper carries bags from Tiffany & Co. jewelers along 5th Avenue in New York City
A shopper carries bags from Tiffany & Co. jewelers along 5th Avenue in New York City, April 4, 2013. Chinese tourists, known for traveling in organized tours and snapping up luxury fashion abroad, spent $102 billion on foreign trips last year, outstripping deep-pocketed travelers from Germany and the United States. REUTERS/Mike Segar (UNTIED STATES - Tags: BUSINESS SOCIETY POLITICS) - RTXY8OD
Photograph by Mike Segar — Reuters

Tiffany & Co (TIF) once again reported disappointing quarterly sales and warned investors on Wednesday to expect more of the same as tourist spending on jewelry and sales of lower-priced items slows.

The jeweler, famed for its robin’s-egg-blue boxes, said global comparable sales, or sales at stores open at least a year plus online, fell 9% globally in the first quarter, stripping out currency fluctuations. That was almost double what analysts expected, according to Consensus Metrix.

It was also Tiffany’s sharpest drop in quarterly sales since the depths of the global financial crisis in 2008-09.

Sales fell in every market but Japan, which generates about one-fifth of sales, and Tiffany executives blamed a “continuation of softness in spending by both local customers and foreign tourists.”

That’s a major problem for a retailer that has expanded aggressively in recent years, hoping to win business from Chinese and other travelers across the world as the strength of the greenback translates into fewer U.S. dollars.

Tiffany’s same-store sales in the Asia Pacific region, its second-biggest market, plummeted 15% as mainland Chinese visitors to hubs like Hong Kong sharply reduced their spending. European sales suffered a similar fate. In the U.S., Tiffany’s home market and by far its largest, tourists account for 25% of sales. For the Americas as whole, comparable sales dropped 10%.

Tiffany is not alone: Retailers from Macy’s (M) to Neiman Marcus have said that lower tourist spending is cutting deep into their business these days. A Tiffany investor relations executive told Wall Street analysts on a conference call Wednesday that the company expects the macro-economic factors hitting the jeweler will abate “at some point.”

One factor that is within Tiffany’s control is its assortment of silvery jewelry items that cost less than $500 and account for about one-quarter of sales. But despite big efforts to improve that assortment, results there have remained soft.

In the last year, Tiffany has sought to re-energize its business by relaunching its watch business, as chronicled by Fortune last year, and more recently, a tie-up with online luxury store Net-A-Porter to sell some jewelry online in 170 countries. Tiffany only gets 6% of its sales online.

For now though, more challenges lie ahead. Tiffany lowered its 2016 profit forecast and now expects a mid-single-digit percentage drop in its full-year earnings per share, compared to its initial forecast for them to stay unchanged or fall by a mid-single digit percentage at most.

A company lowering its annual forecast after only one quarter is unusual and a bad sign: It means Tiffany & Co doesn’t expect to be able to make up for the shortfall.

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