Can New CEO Boost Tiffany’s Sales?

We are maintaining our fair value estimate and wide moat rating for

Alessandro Bogliolo has extensive experience in the luxury industry, notably 16 years at direct competitor Bulgari, where he held various operational roles during the brand’s international expansion. Most recently he held the top position at privately owned Diesel (with revenue of about EUR 1 billion annually, according to a City A.M. interview), where he initiated a turnaround strategy aimed at preserving the brand’s luxury positioning by curtailing wholesale accounts and reviewing retail locations. We believe this strategy is sound as we see controlled distribution as one of the brand intangible moat-supporting pillars in the luxury industry; however, it hasn’t yet borne enough fruit at Diesel to assess Bogliolo's success. A thorough review of Tiffany's retail locations would make sense, given its high department store presence.

Tiffany has grappled with several issues both under and beyond management control, resulting in flat or declining comparable-store sales over the past two years and the former CEO's departure in the beginning of 2017. Cyclically, the luxury goods industry experienced a slowdown in emerging-market demand (the most prominent demand driver since the financial crisis), and the strengthening dollar pushed luxury travel purchasers to buy goods in Europe rather than the U.S. (where Tiffany has a bigger presence). From an industry standpoint, competition in lower-priced fashion jewelry increased and Tiffany lost some market share to new entrants as innovation was slow. Another structural challenge the jewelry industry is facing is the increasing share of female self-purchasing versus bridal and gift buying. We believe the design of the product matters more for this customer group and brand loyalty may be lower, so the marketing message may need to be conveyed differently.

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