Tiffany is making 1 mistake that's killing business
Tiffany & Co. is falling apart.
The luxury jewelry chain reported dire earnings for the first quarter of fiscal 2016. Worldwide sales dipped 7% and comparable sales tanked 9%. That comes on the heels of a dismal fiscal 2015, too; the fourth quarter was plagued by a poor gifting season.
Analysts say Tiffany is making one mistake: selling the same old products to consumers who demand constant newness and fresh offerings.
"When you look across retail over the past year ... you think about the Ross and TJX doing really well ... the higher end is more difficult ... the department stores are struggling," Brian Yarbrough, analyst at Edward Jones, said to Business Insider. "I do think you have a younger consumer that wants a freshness, wants newness, doesn't want the same thing [as] everyone else. That's why they like a Pandora [where] they can put a thousand trinkets [on their bracelets]. In Tiffany, you don't have that."
Young consumers have been conditioned to the speed and price of fast fashion. In addition to Pandora, look no further than BaubleBar, the rapidly growing fast-fashion-esque jewelry startup.
He said that Tiffany & Co. could be "[resting] on their laurels," while still raising their prices, too — something that ultimately doesn't bode well for the company.
Tiffany & Co. has tried to rectify this problem with newer, more fashion-driven collections, as Neil Saunders, CEO of consulting firm Conlumino pointed out in a note to clients last quarter, but there's another problem the brand must face: even older customers aren't buying it. Rather, Yarbrough points to how consumers are spending money on "bigger ticket items" like houses and cars.
The company is blaming a variety of factors for its downturn, and claims that it is working to fix its problems.
"As expected, this was a difficult quarter in terms of both sales and earnings growth. We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong," CEO Frederic Cumena said in a release.
"However, we are continuing to take actions that are intended to strengthen sales growth with local customers in the U.S. and around the world. From a strategic perspective, we believe that our initiatives will enhance our ability to provide our customers with extraordinary products and experiences and ultimately contribute to improved financial results. We remain focused on generating sustainable long-term sales and earnings growth."
Yarbrough believes that these issues won't be abated this year, though he believes the company will eventually bring people back into its stores. However, in the meantime, things look grim.
"Their numbers have gotten worse and worse .... when I went back and looked, I don't think we've seen numbers this bad since the economic downturn," he said.
For now, Tiffany & Co. might just need to figure out how to appeal to the bulk of consumers.
"The main issue, however, is one of brand image," Saunders wrote in a recent note to clients. "Tiffany needs to reconnect with consumers and make itself relevant."
NOW WATCH: Going-out shirts and other things men should stop wearing immediately
See Also:
Abercrombie & Fitch is facing a terrifying reality about its most loyal customers
These photos show why American Eagle is defying the curse of teen retail
SEE ALSO: Move over, millennials — here's where the young consumers of Generation Z are spending their money
