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Slowing sales worry top-end US retailers

NEW YORK – UPSCALE jeweller Tiffany & Co said last Friday that the number of purchases at its American stores dropped during the holiday shopping season, signalling that a pullback in United States consumer spending is percolating up to high-end merchants.

The slowdown was unexpected and sent jitters through the world of luxury-goods makers, which had seemed invulnerable over the last five years, even as energy prices surged and the housing market began to sputter.

Tiffany’s results were among the clearest evidence yet that wealthy consumers – and middle-class shoppers who sometimes splurge on luxury items – were starting to tighten their purse strings.

Saks Fifth Avenue, Coach and Nordstrom have all experienced a slowdown in growth this holiday season.

They have been careful to emphasise that the truly rich are still shopping with abandon – Louis Vuitton merchandise, for instance, was a hit last month. But they concede that just about everybody else is starting to cut back.

At Tiffany, the most disappointing categories were not US$50,000 (S$71,495) engagement rings, but jewellery priced from US$1,000 to US$10,000.

Tiffany’s US retail sales rose 4 per cent between Nov 1 and Dec 31 to US$450 million. Nearly all of that growth, however, can be traced to foreign consumers capitalising on the weak US dollar. Tiffany said without

foreign buyers, domestic sales would have been flat from last year.

The company likewise credited a 10 per cent increase in sales at its flagship Fifth Avenue store in Manhattan to foreign shoppers.

Same-store sales at Tiffany’s American stores fell 2 per cent, a bigger drop than the company had predicted.

A carefully watched barometer in retailing, the measure refers to sales generated only by those stores that have been open at least a year.

Shares of Tiffany dropped $4.52, or 11 per cent, on Friday to close at US$35.80 a share.

Mr Mark Aaron, a vice-president for investor relations, said total sales were below expectations.

‘We entered the holiday season facing well-known, challenging conditions,’ he said. Even so, he added, ‘the magnitude of the softness was more than we expected’.

At the very high end, the number of consumers buying Tiffany jewellery priced over US$50,000 rose, but the average amount spent by those consumers dropped slightly.

Stifel Nicolaus retail analyst David Schick said, ‘Tiffany is not making mistakes in merchandise and marketing.

‘So if Tiffany is doing the right thing and business is down in the US, it gives you a glimpse of how the highend consumer is doing.’


Source: NEW YORK TIMES 14 Jan 08


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