Fast-growing Asian consumer base if the big growth engine behind Tiffany & Co.'s (TIF) sales growth, sending shares up 2% in early trading hours.
In the second quarter, Asia-Pacific net sales grew 28%, while the company's separately reported Japanese segment saw 11% net sales growth year over year, marking the two fastest growing regions for the jewelry retailer.
The combined spending from Asia-Pacific and Japanese customers totaled $456 million in the quarter, nearly equaling the flagship U.S. market sales total of $475 million. The results in the region also moved well past the European market's net sales of $121 million.
The pickup in the region's performance helped contribute to raising guidance to $4.80 per share, up from a high band of $4.70 as the company ramps up marketing spend and investment in the region specifically.
Jim Chartier, a research analyst at Monness, Crespi & Hardt Co. said the widely known Tiffany & Co. brand can remain confident in its strong double-digit sales growth in Asia, particularly in China, because the company is still relatively under-penetrated on the continent compared to other large domestic-based luxury retailers like LMNV and Cartier.
Chartier puts a neutral rating on Tiffany & Co believing many of the positives are already reflected in the stock price.
"I think they can continue to grow at a similar pace going forward with a handful of new stores each year in Asia," Chartier said. "The pace of store growth is the biggest difference rather than same store sales."
A persistent pace in Asia and Japan would catapult the region's sales past the company's traditional sales epicenter in America in short order, denoting the importance that the region is likely to continue to play as the company expands its presence.
CFO Mark Erceg noted strong momentum across Asia and Japan as well as a growing tourist demand for their products as major contributors to the company's continued success this year.
"Our business in Japan continued to perform well and that was on top of good results in last year's second quarter," he explained. "This reflected strong demand that we attribute more to local customers but also to an increase in spending by Chinese tourists."
He added that Chinese consumer within the Asia-Pacific region is a specific target, as the company continues to expand its presence in the nation.
"China is for sure an important area of focus for our investment," CEO Allesandro Bogliolo said during the call, noting future plans to continue expansion. "[China] is one of the key markets among others that we are investing."
The initiative looks to continue to be a growth engine as the company seeks to leverage Alibaba Holdings Limited's (BABA) incredible reach in digital commerce for the country, announcing the opening of a store on "Luxury Pavilion", the luxury section of Tmall, just two weeks ago.
The grand opening of the platform will be effective in September, though pre-sales are effective now, and is sure to impact its continued growth in the region which is supplemented by the opening of additional brick and mortar stores, now totaling 34 locations across the country.
To be sure, Asian consumers, and in particular Chinese consumers, are under pressure at the moment as geopolitical factors like the ongoing trade bluster emanating from Washington and weakening currencies across the region impact purchasing power for the growing consumer base.
However, as the company expands its marketing platform and leverages its new partnerships to take advantage of stronger Asian consumers, the Asian region's place as a primary growth factor for the retailer shows no signs of fading.
Martin Cassidy contributed to this article.
