Nov. 29 - Strike three for Tiffany after the luxury retailer cut its sales and profit forecast for the third quarter in a row. Bobbi Rebell reports.
Tiffany cut its outlook for the third time this year. Higher precious metal and diamond costs are cutting into margins- and growth in one of its most lucrative regions, Asia, is stalling. Morningstar's Paul Swinand: SOUNDBITE: PAUL SWINAND, RETAIL ANALYST, MORNINGSTAR (ENGLISH) SAYING: "People haven't fully appreciated that this is a Japan-style real estate bubble that just went through China in the last 3-5 years. So while my forecast for China and the luxury goods makers that sell in China is not a disaster, I think we have got to recognize that this is going to be a slow go for the next several years" Tiffany has been banking on new markets like China where it gets about a quarter of its business. Another source of weakness: relatively inexpensive products like silver jewelry; a sign consumers are holding back spending on things they don't need right away- especially with the fiscal cliff worries. And Swinand says that hesitation isn't limited to the aspirational luxury category. SOUNDBITE: PAUL SWINAND, RETAIL ANALYST, MORNINGSTAR (ENGLISH) SAYING: "I think the higher-end shopper is actually more sensitive to you know financial crisis in Europe, fiscal cliffs, dividend taxes, Wall Street bonuses and that happens to be the $10/$20/$50,000 engagement ring shopper for Tiffany so I think the fear for me is that there is another shoe to drop on the high-end." And the damage likely won't be limited to Tiffany. In an earlier report, consulting firm Bain and company forecast that global luxury sales growth would slow. It all comes down to worries about the economy says Standard & Poor's Beth Ann Bovino: SOUNDBITE: BETH ANN BOVINO, DEPUTY CHIEF ECONOMIST, STANDARD & POOR'S, (ENGLISH) SAYING: "That uncertainty will cause people, consumers to spend a little bit less or if they do spend they may not go to that high-end store. Instead they will buy that bracelet but buy it at a middle market instead, that means less business for high end retailers." Tiffany does expect to see improvement in the current holiday season, when it rings up about one-third of its annual sales.