Tiffany May Lose Elsa Peretti License, Has Mixed Quarter

Elsa Peretti, the famed Italian designer whose creations comprise 10 percent of Tiffany’s net sales, may sever her 38-year relationship with the famed jeweler, the company admitted in a May 23 filing with the Securities and Exchange Commission.

Since 1974, Tiffany has had the sole license for Peretti’s designs. Current Peretti designs sold by Tiffany include the “Diamonds by the Yard” collection and teardrop necklaces.

But now, Peretti, 72, has expressed interest in retiring from the relationship and has authorized her advisors to look into possibly selling her intellectual property to Tiffany.

Tiffany has made what it called “a firm offer” to Peretti, but no agreement has been reached yet, the company said. Tiffany said that an agreement would likely improve the company’s cash flows and operating results.

However, if no deal is reached, Peretti’s advisors have said they may terminate their Tiffany license agreement. If that happens, Tiffany said it could eventually lose the right to sell Peretti’s products, and its operating results would be adversely affected, it said.

“[The] potential losses in net sales could be substantially mitigated through efforts that include the design and merchandising of new products, redeployment of advertising and display resources now devoted to Peretti-designed products, and changes in the promotion, display, and merchandising of existing products,” the company added.

Peretti, a former model and Studio 54 habitué whose acquaintances included Andy Warhol and Truman Capote, is also known for her “bone cuff” and “articulated snake” designs.

In related news, Tiffany announced that worldwide net sales for the first quarter of fiscal year 2012 increased 8 percent to $819 million. Net earnings increased 1 percent to $82 million.

In a conference call following the release of the results, vice president of investor relations Mark Aaron acknowledged results were “mixed.”

“The shortfall to our expectation was entirely in the Americas while quarterly sales in Asia Pacific, Japan, and Europe came in pretty much where we expected,” he said.

Among the factors cited by Aaron as impacting Tiffany’s sales in the U.S.: Restrained spending by customers in the financial sector; substantial competitive discounting; and softness in entry-level silver due to price increases.

Aaron added the company has seen good results from its engagement jewelry sales, the Yellow Diamond Collection, gold jewelry, and designs from Paloma Picasso. It is also pleased with initial customer reaction to its updated 1837 collection with the new RUBEDO metal.

Highlights of Tiffany & Co.’s financial statement (three months ended April 30):

  • American sales: up 3 percent
  • Asia-Pacific sales: up 17 percent
  • Japanese sales: up 15 percent
  • European sales: up 3 percent

The company’s board has approved a 10 percent increase in the quarterly dividend rate, marking the 11th increase in the past 10 years.