Tiffany’s Cuts Breakfast

Tiffany failed to glitter

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What's going on?

On Friday, American jeweler Tiffany & Co. slashed its annual profit forecast after tourists from China and local European consumers cut their spending over the holidays. Cereal it is…

What does this mean?

The luxury retailer lost some sparkle, saying its profit would be at the lower end of what it promised investors last November after its holiday sales slipped 2% in November and December. The run-up to the holidays is vital for retailers as consumers bring the big bucks to spend on loved ones – and flashy jewelry shows you care (right?). But frugal tourists, particularly those from China, disappointed Tiffany’s, which was banking on the country’s booming middle class to drive sales.

Rival Signet Jewelers also reported a rocky holiday season on Thursday, with sales that missed expectations – and its shares fell 25%.

Why should I care?

For markets: Record spending, but elsewhere.

Investors were expecting an excellent US holiday season after spending data from November to Christmas Eve pointed to the best holiday shopping period for six years. But greater numbers of people ditched the mall in favor of shopping online – and Amazon cleaned up with a record season. Department stores like Macy’s and Kohl’s, which are shifting further online but still have several physical stores, suffered along with Tiffany’s. And tourists – the would-be saving grace who are typically more likely to buy big in-store – weren’t much help.

For you personally: A golden opportunity?

Luxury retail needs fancy materials and a lot that glitters is gold, literally. Jewelers are huge gold buyers, snapping up around 55% of global supply (tweet this). With Tiffany and Signet selling less, it’s possible that demand for – and therefore the price of – gold could fall. But investors tend to buy gold in times of uncertainty – so those fearing a difficult 2019 for stocks might more than make up for any slackening of demand for gold from the jewelers.

Originally posted as part of the Finimize daily email.

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