Tiffany: always stylish, always profitable
Tiffany: always stylish, always profitable
Tiffany & Co. is a leading jewelry brand that enjoys great esteem in Japan for its engagement rings, Elsa Peretti-designed Open Heart necklaces and many other wonderful creations. In this third installment in a series of articles about the world’s high-end brands, Yomiuri Shimbun Correspondent Hiroshi Ikematsu interviews New Jersey-born Michael Kowalski, who has been chief executive officer of the U.S. company since 1999, to learn why the New York-based firm has been so successful.
Yomiuri Shimbun: What differentiates Tiffany from other prominent jewelry brands?
Michael Kowalski: Certainly, our focus on diamonds is an important differentiating factor. Diamonds represent the most significant part–the fastest growing part–of our business and will continue to be the fastest growing part of our business. We believe that Tiffany is about things that last. We are not about fashion, but we believe we are about style. We take a very long-term view of our product. We believe that much of our product is transgenerational–it extends from one generation to another.
Are you interested in expanding the product line?
No. Tiffany has always focused on jewelry and will continue to do so. We don’t view ourselves as a generalist brand. We view ourselves as product specialists. We manufacture the vast majority of our own jewelry in our own workshops. We very much are focused on our supply chain, and controlling our supply from the mine all the way to the final consumer. Tiffany is probably more vertically integrated than anyone in the world.
Are there specialist groups that source your diamonds?
Yes. We buy diamonds from everywhere in the world–Canada, Botswana, Namibia, South Africa, and, of course, Russia. So we have a worldwide sourcing organization of several hundred people. We grade all of our diamonds right here in New York at our own grading laboratory. We offer a Tiffany certificate. I would remind everyone it’s more than just a certificate–it’s a guarantee.
How are things with your online store?
We’re had a great success over the years in e-commerce. We launched e-commerce in 1999–we were probably one of the first luxury brands to have a dedicated e-commerce capability. It’s grown to be in the United States a significant part of our retail business.
Really it was intended to provide U.S. customers with options. We were one of the pioneers in providing customers with information about diamond quality, our diamond standards and how to buy a diamond. We started that many years ago with booklets in our stores. As we speak today, the vast majority of customers get that information by going to our Web site.
How is Tiffany’s business in Japan?
Japan, of course, has been a difficult market for us over the past several years, but we do believe that Japan as a market can continue to grow for us. We feel very good about our diamond business–our engagement business–in Japan it has continued to be one of the strongest parts of our business.
We have much more work to do in Japan, but we certainly are committed to the Japanese market and it’s still a very important part of our overall company.
In Japan, the engagement market is now very competitive, with many European brands involved.
Although I guess it’s stabilized now, since the early ’90s, the engagement market in Japan has declined significantly. Throughout all that period, we have continued to grow our business. We believe we are continuing to gain market share. Certainly, there is more competition with the arrival of De Beers, Harry Winston, Bulgari and Cartier. But we do believe that the strength of our marketing position will serve us well.
Which products are particularly favored in Japan?
I certainly think that the designs of Elsa Peretti continue to be classic jewelry of the highest design integrity, and that has always been an important part of our business in Japan. And, certainly, our diamond pendants [are popular with Japanese customers]. The retail price of a diamond pendant is not that different from the price of a fashion handbag. The point that we like to make to customers is that the handbag might be fashionable for one or two years. The diamond pendant can last a lifetime–it doesn’t go out of style–so I’m particularly fond of that.
The global economy seems to be declining. What is your strategy?
We don’t plan any dramatic change in strategy. Like all good luxury brands, we manage this company from a very long-term point of view–we are certainly going to [continue to] do that. In fact, in 2008, we plan to increase the number of stores that we are opening internationally and continue to build new domestic stores.
We’ve lived through many economic downturns before, and quite honestly we believe that it can provide opportunities for us. I think for strong brands it provides opportunities.
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N.Y. store a jewel in the crown
The history of Tiffany & Co. dates back to 1837 when Charles Lewis Tiffany (1812-1902) and John B. Young established a stationery and fancy goods emporium in New York with 1,000 dollars borrowed from Tiffany’s father. The pair drew public attention in New York by placing a nonnegotiable price tag on each item–an innovative business practice at the time.
The small business, which was later renamed Tiffany & Co., got its breakthrough in 1848. At the time, a wave of revolutions, including the February Revolution in France, swept Europe, causing the price of gems to plummet. Tiffany was able to snap up diamonds at less than half the original prices, elevating the company to one of the world’s leading jewelry merchants.
In 1867, Tiffany & Co. became the first U.S. firm to receive the Award of Excellence for silverware during the Paris Exposition Universelle, a development that recognized the U.S. company as ranking with its European peers in terms of artistry and craftsmanship.
The modern history of gemology would be incomplete without reference to Tiffany & Co. The United States adopted the company’s standard for gauging the purity of silver and platinum as the official standard of purity.
Tiffany & Co.’s history has evolved in tandem with that of the United States. The company was commissioned to design a presentation pitcher for Abraham Lincoln’s presidential inauguration. During the American Civil War, the company supplied swords to Union officers. Tiffany & Co. later was assigned to revise the Great Seal of the United States and design the White House’s china.
The company presents its products in a American way–providing high-end items ranging from diamonds to moderately priced silverwork affordable for people from all walks of life.
In 1961, Tiffany & Co. became a worldwide household name thanks to the movie “Breakfast at Tiffany’s,” starring Audrey Hepburn. The Fifth Avenue store has since become one of the world’s most famous tourist spots.
The company made its debut in Japan in 1972 with the opening of its first boutique in Nihombashi, Tokyo. It has since established an active presence in other parts of Asia and Europe.
Tiffany Says Profit Exceeded Analysts’ Estimates
Tiffany & Co., the world’s second- largest luxury-jewelry retailer, said fourth-quarter profit fell, beating some analysts’ estimates after international revenue surged and the company boosted sales of more-profitable pieces.
Tiffany climbed the most in more than seven years in New York Stock Exchange composite trading.
Net income declined to $118.3 million, or 89 cents a share, for the three months through Jan. 31, from $140.5 million, or $1.02, a year earlier, New York-based Tiffany said today. Profit before one-time items including the cost of discontinuing some watch styles beat analysts’ estimates, and the company increased its annual profit forecast after an inventory-valuation change.
The jeweler’s revenue advanced 9.8 percent to $1.05 billion, with international sales jumping by a fifth. Growing sales in Asia and Europe are helping the jeweler overcome a slowdown in U.S. spending. American consumers have been discouraged by the worst housing slump in a quarter century and job cuts.
“With about 40 percent of sales from international markets, it offers some downside protection from the weak economic trends,” Kristine Koerber, an analyst with JMP Securities LLC in San Francisco, wrote in a March 19 report. She rates the shares “market outperform.”
Before one-time items including the 9 cent per-share cost of discontinuing some watch styles, Tiffany earned $1.27 cents a share. Twelve analysts surveyed by Bloomberg estimated average profit of $1.21, before one-time items.
Excluding the cost of the move to stop selling some watches, gross margin widened for the quarter, the company said.
Net earnings for the year that began Feb. 1 will be $2.75 to $2.85 a share, after a change in the method the company uses for valuing inventories. The company forecast $2.50 to $2.55 on Feb. 8. Seven analysts surveyed by Bloomberg estimate net income of $2.54, on average.
Tiffany jumped $5.28, or 14 percent, to $43.88 at 10:01 a.m., the biggest gain since January 2001. The stock rose 17 percent last year.
The company had 184 stores and boutiques, including 70 in the U.S. on Jan. 31.
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