Tiffany & Co., the iconic jewelry brand under LVMH, is set to significantly reduce the size of its flagship store in Shanghai, according to sources close to the matter, as the Chinese luxury market struggles amidst economic challenges.
The flagship, located in the prestigious Hong Kong Plaza, spans over 12,000 square feet and was unveiled in a grand opening in late 2019. However, amid plunging sales in China, the brand will vacate about half of the store space this month. The landlord, Lai Sun Group, is already in talks with potential new tenants to occupy the soon-to-be-empty section. The decision to downsize underscores the pressures facing global luxury brands as consumer behavior shifts in the world’s second-largest economy.
Both Tiffany and Lai Sun Group, which oversees the mall through Lai Fung Holdings Ltd., declined to comment on the changes.
This strategic retreat highlights the growing difficulties luxury brands are experiencing in China, where an economic slowdown and a weakening property market have affected consumer spending. Chinese shoppers, once the main drivers of global luxury sales, are increasingly seeking discounts in gray markets or taking their spending overseas, particularly to countries like Japan, where favorable exchange rates make luxury purchases more attractive. These trends have put considerable strain on high-end brands like Tiffany, which are feeling the pinch in terms of both growth and profitability.
LVMH, Tiffany’s parent company, reported a 3% drop in revenue for its watches and jewelry division in the first half of the year, marking it as one of the poorest-performing segments. Additionally, profits from recurring operations for this division fell by a steep 19%, illustrating the challenges faced by the luxury giant.
In response to the market’s downturn, Tiffany has reportedly requested a rent reduction for its Shanghai store, which remains one of its largest in Asia and features the brand’s first Blue Box Cafe in China. While the store will shrink, the cafe will stay open, catering to the city’s remaining luxury clientele.
Acquired by LVMH in 2021, Tiffany has struggled to meet the lofty sales expectations set by the luxury conglomerate led by Bernard Arnault. In addition to sluggish sales, the company has faced internal turmoil, with employee departures due to reduced commissions. Some of these former employees have reportedly joined rival brands, taking their loyal clients with them, further intensifying competition.
Tiffany’s shrinking footprint in Shanghai reflects a broader trend of luxury brands recalibrating their operations in China, as competitors like Cartier, owned by Cie Financiere Richemont SA, gain ground and market share in an increasingly competitive environment.
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