Tiffany’s tanking sales confirm a disturbing new trend among wealthy shoppers

tiffany

Tiffany & Co/Facebook

Tiffany & Co. is losing its luster.

The iconic luxury retailer saw same-store sales nosedive 8% in the second quarter of fiscal 2016.

That marks the 7th straight quarter of decline for the brand, which is facing an industry wide problem: shoppers are increasingly frugal and unlikely to pay for discretionary items, like luxury jewelry.

Brian Yarbrough, CFA and analyst at Edward Jones, told Business Insider that the luxury category as a whole has been struggling, though Tiffany has been hurting more than other luxury jewelers.

People with more money might be willing to spend on big ticket items, but they're more inclined to spend on home renovations, boats, or cars, he said. Jewelry — aside from engagement rings — remains a much more discretionary category.

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Tiffany has also struggled from a lack of newness — something that young consumers crave. 

Yarbrough says that Tiffany has been working to improve its selection with more fashion-driven collections. Separately, the brand has been zeroing in on its marketing by including celebrities like Elle Fanning in its campaigns.

But that still wouldn't make it easy to buck the overarching trend — that as a whole, shoppers are looking for value. That's why off-price retailers, like TJ Maxx, are thriving. Yarbrough says that wealthier consumers are increasingly shopping at off-price retailers to find a good bargain.

"What seems to work are off price retailers, [with] people wanting a good deal," he said. That's bad news for Tiffany. "For someone like Tiffany that doesn't work because they don't discount." (He did, however, say that Tiffany should not be discounting — it's the right move for its reputation and prestige.)

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Yarbrough also pointed to how foreign tourists are spending less. CEO Frederic Cumenal acknowledged this.

"The global environment continues to reflect well known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists, especially from China," Cumenal said in a statement.

But that aside, frugality appears to be in, and that's extremely problematic for luxury brands.

"People are frugal right now, and people are looking for a value, and that's not going change," Yarbrough said. "So the Tiffanys of the world are going to have to figure this out."

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