Add Tiffany & Co. to the list of retailers regaining their mojo.
The luxury jeweler says thanks to increased marketing efforts, sales climbed 12% while profits jumped 16%, both exceeding industry forecasts. The retailer also raised its outlook for the rest of the year and says its dramatic new ad push is helping attract new and younger customers, as well as bringing lapsed customers back to its baubles.
For the second quarter, Tiffany says revenues advanced to $1.1 billion, including gains in all product categories, and comparable-store sales improved 8%.
Net earnings grew 26% to $145 million, compared to $115 million a year ago. In the Americas, sales gains notched an 8% increase, and in Asia/Pacific, revenues gained 28%.
The company credited increased marketing spending for the growth, as well as the popularity of its new Paper Flowers collection, introduced back in May with a rap-and-“Breakfast at Tiffany’s”-infused campaign from Cass Bird that’s markedly different than past efforts.
“We believe our evolved brand message is gaining momentum,” says CEO Alessandro Bogliolo, in a conference call to discuss the results.
“To address the priority to amplify an evolved brand message, we have increased marketing spending across a range of media in the second quarter, and spending for the remainder of the year is planned to be well above prior-year levels. Our recent ‘Believe In Dreams’ campaign created a modern interpretation of the historical legacy of Tiffany.”
And while he declined to give details, he says the company will continue to increase spending, including “a whimsical holiday campaign planned for later this year.”
Besides beefing up ad budgets, the company says it also ramped up spending on technology, digital, visual merchandising and in-store presentations -- investments it says are essential for long-term growth.
Earlier this month, it detailed plans for a total renovation of the New York City flagship, which it expects to complete by 2021.
“Increased marketing activities, new collection acceptance, and a continued supportive demand backdrop should help fuel sales growth,” writes Jelena Sokolova, an analyst who follows Tiffany for Morningstar, in reaction to the news. “Over the long run, we think Tiffany can deliver mid-single-digit growth, benefiting from increasing high-net-worth and middle-class individuals globally, with upside potential from more frequent purchases as existing client welfare increases.”
Declining global marriage rates are a concern, she says, since engagement rings represent about 25% to 30% of Tiffany’s sales, and competition is intense. “We expect this to be offset by higher growth in China and India.”