NEW YORK — Tiffany & Co. reported first-quarter sales that fell short of projections, while warning that tariffs will rise on the jewellery it sends to China from the US Shares fell in early trading.

Comparable sales, a key retail metric, fell 2 percent worldwide on a constant currency basis, missing the average of analysts’ estimates for 1.2 percent drop from Consensus Metrix. The company’s gross margin also shrank and also fell short of estimates.

Key Insights

Growing tensions between the US and China have taken a toll on the jewellery maker. Over the holidays, Tiffany said it was hurt by a drop in spending by Chinese tourists, an important customer group. The company warned that this situation has persisted, with “dramatically lower worldwide spending attributed to foreign tourists.”

This situation could be exacerbated going forward by a warning that China issued on Tuesday about travel in the US. The country’s Ministry of Culture and Tourism cited recent “frequent” shootings, robbery and theft in the US, according to Xinhua News Agency. That’s likely to further reduce Chinese travel abroad — and the purchases they make there.

Sales to local customers improved however, led by China, according to Chief Executive Alessandro Bogliolo, who predicted Tiffany “is positioned for improving trends in the second half of 2019.”

While Asia was a bright spot, with flat same-store sales there outpacing estimates for a drop, most other region performed worse than expected. In the Americas, a comparable sales decline of 4 percent was almost almost twice as big as estimated.

The company sees earnings coming under pressure in the second half, in part because of tariffs rising to 25 percent on the jewellery the company sends to China from the US. The company has also quietly gone on a hiring spree in the past two years, and is increasing its retail square footage and relocating 15 stores.

Market Reaction

Tiffany shares fell 2.7 percent to $88.49 in pre-market trading, paring a steeper earlier decline.

By Kim Bhasin; editors: Anne Riley Moffat, Jonathan Roeder and Marthe Fourcade.