Tiffany has long counted on hordes of international tourists to come to its stores and pick up little blue boxes to bring home.
Yet, with a strong dollar that has made exchange rates less favorable, many visitors have been less inclined to drop cash on pricey jewelry.
This has been bad news for the luxury retailer's business and in the first quarter, sales at existing stores declined 9%.
“As expected, this was a difficult quarter in terms of both sales and earnings growth," said CEO Frederic Cumenal in a statement on Wednesday. "We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong."
In other words, tourists are spending less in basically every part of the world where Tiffany does business. Sales at existing stores plunged 15% in Europe, 15% in the Asia-Pacific region and 10% in the Americas, largely because of weakness in the U.S. The only bright spot was Japan, where sales rose 12%.
To get a sense of how important tourist spending is to Tiffany, consider that visitors are responsible for roughly 25% of U.S. sales and 40% of sales at the New York flagship store. Tiffany also looks abroad for more than half of its total revenue.
Yet, a stronger dollar has been a menace to tourist spending. So, too, has been turmoil in Europe, where there's been an influx of migrants and recent terror attacks.
Tiffany also has to contend with how tourists interpret the value of their dollar. "When you have a currency moving in one direction or the other direction, consumers and tourists really tend to believe that everything is a deal in a given country or that everything is super expensive in another country," said Cumenal earlier this year, who added that this isn't really the case. For a Chinese tourist, Tiffany isn't cheaper in the U.S. or Europe, for instance.
It's introducing new jewelry at lower price points in hopes of wooing customers. Yet, don't count on Tiffany to run sales on existing jewelry anytime soon. "We will never do that," said Cumenal.
The jeweler isn't optimistic that tourist spending will pick up much this year, after a rough 2015. It's now forecasting that profits will fall by the mid-single digits this year, whereas previously it had said profits would be flat or fall by mid-single digits.
During the first quarter, total sales fell by 7% to $891.3 million in the first quarter, below Wall Street analyst estimates of $915.1 million.
Tiffany posted a profit of $87 million, or 69 cents per share, down from $105 million, or 81 cents per share, in the same period a year ago. This topped analyst estimates by a penny.
Shares of Tiffany, which have dropped 25% in the last 12 months, fell another 3% to $62 on Wednesday.
