Tiffany shares lose sparkle as chief executive departs

Pedestrians pass in front of the Tiffany & Co flagship store on Fifth Avenue in New York

Shares in upmarket US jeweller Tiffany lost some of their lustre on Monday, after the abrupt departure of its chief executive sparked uncertainty following a disappointing holiday season.

Frederic Cumenal has been replaced with immediate effect by board chairman and former chief executive Michael Kowalski, Tiffany said in a statement late on Sunday.

The news sent its shares down 2.5 per cent to $78.49 in New York on Monday, cutting Tiffany’s 12-month rise to 26 per cent.

The group said its board was committed to existing core business strategies, “but has been disappointed by recent financial results”. It has been working to add more sparkle to the customer experience at its stores and freshen its product assortment, something Tiffany said it plans to accelerate.

Mr Cumenal’s departure comes after the company, known for its blue boxes, recorded lacklustre sales during the holiday season. Like-for-like sales fell 2 per cent in the two months to the end of December compared with 2015. Net revenues ticked up to $966m from $961m.

The tepid performance during the key shopping season was driven by a 4 per cent fall in like-for-like revenues in the Americas, its biggest market. Tiffany outlet online attributed the weakness to lower consumer spending and a 14 per cent drop in sales at its flagship store on New York’s Fifth Avenue.

The store sits directly next to Trump Tower and was subject to intense security measures when Donald Trump used the building as his main office during his transition to the White House.

For the fourth quarter, Wall Street analysts believe Tiffany’s like-for-like sales fell 1.1 per cent, marking the fifth consecutive quarterly decline. Revenues are forecast to come in at $1.21bn. The group is due to report on its fourth quarter on March 17.

Tiffany reported a 2 per cent fall in like-for-like sales in the third quarter, though net revenues edged up 1 per cent to $949m.

Mr Kowalski will serve as interim chief executive while the group seeks a permanent replacement for Mr Cumenal. Mr Kowalski was the company’s chief from 1999 to April 2015, when Tiffany promoted Mr Cumenal, who joined the jeweller in 2011 from champagne brand Moët & Chandon, to the top spot.

Mr Cumenal’s departure represents the third big shake-up to Tiffany’s executive ranks in the past 10 months. Former finance chief Ralph Nicoletti left in May to assume the same role at consumer goods group Newell Brands. Tiffany replica also announced last month that it had appointed Reed Krakoff as newly created chief artistic officer.

“While we still consider Tiffany as a foremost luxury brand with multiple long-term drivers, we are concerned with the multiple executive changes,” said Betty Chen, an analyst at Mizuho who cut her rating on the stock to “neutral” from “buy” after the news of Mr Cumenal’s exit.

Simeon Siegel at Nomura added that the timing of the release, which came just hours before Tiffany’s Super Bowl half-time advertisement starring Lady Gaga, “may lead to investor questions”.

Still, Randal Konik at Jefferies said investors would welcome the change of leadership, “as the outgoing CEO did a great job of protecting the brand but didn’t communicate as much urgency in product newness”.