The decline of luxury goods in Japan, as seen through Tiffany’s latest earnings report

Japanese consumers just kept walking past luxury retailers this quarter.
Japanese consumers just kept walking past luxury retailers this quarter.
Image: Reuters/Toru Hanai
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Tiffany & Co. had another strong quarter of sales around the world, beating expectations with $993 million in revenue—a 7% increase over the same time last year. Those numbers would have been higher if not for a striking revenue decline in Japan, tied to a consumption tax increase there that kicked in on April 1. (Tiffany’s fiscal second quarter ran from May 1 to July 31.)

The jewelry company attributed its sales growth in “other” regions to the opening of a store in Russia and stronger revenue at stores in the United Arab Emirates.
The jewelry company attributed its sales growth in “other” regions to the opening of a store in Russia and stronger revenue at stores in the United Arab Emirates.

During Tiffany’s fiscal first quarter, customers in Japan, anticipating the tax hike, made enough blue box purchases ($174 million worth) to drive up the retailer’s Japanese sales by 20% from the prior-year period. This included a sharp falloff in sales in April after the new tax rate took effect. Second-quarter sales in Japan totaled $119 million, down nearly 32% from the first quarter and 13% lower than in the second quarter of last year.

Despite the post-tax-increase slowdown, Japan’s luxury goods market is expected to rebound by the end of this year—if not sooner, according to reports by McKinsey & Co. and the Japanese advertising agency Hakuhodo. Tiffany executives were similarly optimistic in a conference call with investors this morning, and the company has raised its full-year earnings forecast.