Investors were bracing for bad news from Tiffany (NYSE:TIF) in its second-quarter earnings report, as the luxury jewelry specialist's growth trends have been slowing for nearly a year. Yet shareholders were still surprised to see the chain post lower sales and reduced earnings, as well as dial back its 2019 outlook. The fiscal year targets reflect the same pockets of demand weakness that CEO Alessandro Bogliolo and his team have highlighted in recent quarters, along with a few new challenges facing the business.

Let's take a closer look.


Q2 2019

Q2 2018



$1.05 billion

$1.08 billion


Net income

$136 million

$145 million






Data source: Tiffany's financial filings. 

What happened with Tiffany this quarter?

Sales performances varied across Tiffany's selling footprint but were generally soft and worsened when compared to the prior quarter. Profitability held steady, but only because management shifted some marketing spending into the back half of the fiscal year.

A woman wearing diamond earrings, necklace, and bracelet

Image source: Getty Images.

Here are some of the key highlights from the quarter:

  • Comparable-store sales fell 1% compared to a flat result last quarter. That result reflected soft demand in most of Tiffany's markets, with comps falling 4% in the U.S. region, 6% in Europe, and 1% in Japan. Those losses were mostly offset by modest growth in China.
  • Gross profit margin fell for the second straight quarter following a string of increases in 2018. The metric slipped to 62.7% of sales from 64% a year ago and is down to 62.2% of sales so far in 2019 compared to 63.5% in the same period last year.
  • Selling expenses dropped 5% to mark a major departure from recent trends, given management's aggressive spending on store remodels, e-commerce, and marketing. The decline was due to a shift of advertising spending into future quarters, and so it will only provide a temporary earnings lift. Still, the move helped operating margin hold steady at about 18% of sales. 

What management had to say

Executives said the results were again impacted by slowing spending on the part of Chinese tourists visiting other major world cities. On the bright side, local shoppers for the most part continued to visit Tiffany's stores. "[W]e are encouraged ... by sales growth attributed to our local customer base globally, which was again led by double digit growth in mainland China," Bogliolo said in a press release. Still, management noted some weaker local-spending trends, especially in the key U.S. market.

Despite that challenge, as well as other new issues including economic disruptions in Hong Kong and rising exchange rate pressures, executives expressed confidence in their growth plan. "[W]e are actively managing what is in our control and positioning our brand to win [by] accelerating new product introductions and keeping a visible profile," Bogliolo stated.

Looking forward

That brand support goal requires aggressive marketing spending over the next six months, which will pressure earnings and potentially push operating margin lower for the full year. Tiffany also lowered its sales outlook to predict roughly flat comps compared to the modest increase executives were targeting as recently as early June.

While representing a downgrade from its earlier forecast, the 2019 outlook implies better results over the next six months than shareholders have seen through the first half of the year. To fulfill that growth stock promise, Tiffany will have to show that its merchandising and marketing strategies have put it in the right position to return to growth through the upcoming holiday shopping season despite data so far this year pointing to increasing demand challenges.

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