Tiffany’s New Stores Will Increase U.S. Presence

Tiffany is introducing a new store concept that will more than double the number of stores it has in the United States. The new, smaller-format stores will occupy approximately 2,000 square feet and offer standard Tiffany product with the exception of engagement and statement jewelry. Catering to the female self-purchase market, they have the working name Tiffany & Co. Collections.

The first new-format stores are expected to open in 2008. Current plans call for opening three to five each year, later increasing to eight to 10 per year, for an eventual total of 70.

Michael J. Kowalski, Tiffany chairman and chief executive officer, said the company is continuing plans to open five to seven traditional Tiffany stores per year. Those stores average about 5,000 square feet. The company operates 68 Tiffany stores in the United States and has a goal of 170 stores, including all formats.

Mark Aaron, Tiffany’s vice president of investor relations, told JCK the new stores will feature price points from $100 to $15,000. They will carry mostly gold, silver, and platinum and some pieces with diamond accents. “It is essentially a Tiffany store offering a subset of our product offerings,” he said. “It is not a budget version of Tiffany or a separate brand.”

The stores will open in areas where Tiffany has no presence and cities where it wants to supplement an existing presence. Aaron gave university towns as an example of the former and Los Angeles as a possible example of the latter. He notes that the stores will have greater productivity and profitability than the standard Tiffany stores.

Asked if he was concerned about diluting the company’s fabled brand, Aaron said, “If this was [diluting it], we just wouldn’t do it. We are talking about maybe in 15 years having 170 stores in the U.S.”

Even so, a Wall Street Journal blog warned recently: “If every mall rat ends up with a Tiffany key chain, it could tarnish the company’s image. After all, it was only five years ago that management became so alarmed over the popularity of its charm bracelets among the masses that it hiked prices.”

Aside from that, analysts generally praised the plan, while news reports portrayed the move as the result of pressure from Nelson Peltz, an activist investor who earlier this year bought 5.5 per-cent of Tiffany, becoming its largest shareholder.