Strong dollar crushes Tiffany

Millions of people worldwide will be surprised and delighted to receive a little blue box this holiday season, but a strong U.S. dollar means Tiffany’s spirits won’t be quite as bright.

As the dollar has strengthened throughout 2015 it has been a blessing for American who travel overseas and a curse for international tourists coming to the U.S. Likewise, U.S. retailers who derive a significant portion of their sales and profits from international markets and also count on sale from foreign tourists have been hard hit. For example, Tiffany & Co. said its sales for the third quarter ended Oct. 31 declined to $938 million from $960 million while net income dropped 8% (excluding a prior-year charge) to $91 million from $99 million.

“As expected, the strong U.S. dollar continued to put pressure on our financial results, specifically from the translation of non-U.S. sales into dollars and on foreign tourist spending in the U.S.,” said Tiffany CEO Frederic Cumenal. “In addition, we believe that volatile, uncertain economic and market conditions in the U.S. and other regions are affecting consumer spending, causing us to maintain a cautious near-term outlook.”

The company said it expects full year profits to decline between 5% and 10% from last year’s earnings per share of $4.20 while it focused on those things it can control.

“We’re pleased with our progress this year in expanding our store base and introducing and communicating compelling new product designs,” Cumenal said. “And we are focused on efforts to manage our operations and inventories more efficiently to enhance cash flow. We are well prepared to delight our customers as they celebrate this holiday season, and our management team’s longer-term strategy continues to call for further strengthening Tiffany’s solid position among global luxury brands, which we believe will ultimately drive improved financial results.”

So far this year, Tiffany has opened 10 stores and ended the third quarter with 305 locations, of which 105 are located in the Americas. Tiffany also operates 79 stores in Asia-Pacific, 56 in Japan, 39 in Europe, and five stores in the United Arab Emirates and one in Russia.