LVMH jewellery giant Tiffany & Co. plans to downsize its more than 12,000-square-foot flagship store in Shanghai, people familiar with the matter said, as luxury sales in the world’s second-largest economy plummet.
Tiffany, which opened a two-story store at Shanghai’s Hong Kong Plaza in late 2019 with much fanfare, has decided to vacate about half of the space, the people said, asking not to be identified because the deal is private. The brand will vacate the store later this month and the landlord is already in talks with potential new tenants, the people said.
Neither Tiffany nor Lai Sun Group, which controls luxury mall owner Lai Hung Holdings, immediately responded to requests for comment.
Tiffany’s departure from China’s financial hub highlights the increasingly tough operating environment the world’s luxury giants are navigating amid a slowing economy and a sluggish real estate market. Chinese shoppers are becoming more price-conscious and are looking for bargains on the grey market or overseas, where currencies are weaker, such as Japan. That’s sparked a big drop in sales for luxury brands, stifling growth and squeezing profit margins.
LVMH’s watches and jewellery division was one of its worst-performing divisions, with revenue down 3% in the first half of the year compared to 2018. The division’s recurring profit fell 19%.
The company’s shares fell for a fifth straight day on Thursday, dropping more than 14% this year. Morgan Stanley earlier cut its price target for LVMH and lowered its forecasts, citing concerns about weak demand from Chinese customers.
Tiffany has also asked Lai Fong to lower the rent for its Shanghai flagship store, one of the people said.
The store, located in Shanghai’s central business and shopping district, is home to Tiffany’s first Blue Box Cafe in China and third in the world. The store is currently one of the brand’s largest in Asia. The cafe will remain in place after the downsizing, sources said.
The 187-year-old brand has missed its ambitious sales targets since billionaire Bernard Arnault’s luxury empire LVMH bought the jewelry distributor in 2021. Tiffany has also seen a surge in employees leaving recently because they are now paying lower commissions than they used to, with some moving to competitors and taking some of their loyal customers with them, Bloomberg News reported earlier this year.
The brand has come under further pressure from rivals, losing market share to companies such as Cartier, owned by Sie Financières Richemont SA.
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