Tiffany loses some of its sparkle, thanks to strong U.S. dollar

Tiffany & Co. said Friday that it raked in $1.3 billion in sales of diamond rings, gold necklaces and other baubles in its most recent quarter, and yet its haul would've worth been millions more if it weren't for an economic surprise that has lately been a drag on many U.S. businesses: The strength of the dollar.

Retailers from Walmart to Lululemon and Michael Kors have said that foreign exchange rates have hurt their balance sheets as the dollar has staged its biggest rally in nearly four decades and, in turn, made their overseas sales worth less when they are translated into U.S. dollars. But analysts say that the currency situation is particularly challenging for Tiffany because of the unique characteristics of its customer base: It draws a large share of its sales from international markets, and at its stateside locations, it counts on big spending from affluent foreign tourists who are suddenly finding the goods just became more expensive.

More than half of Tiffany's sales come from inter

national markets. For 2014, 13 percent of Tiffany sales came from Japan, and another 24 percent came from its Asia-Pacific division, which includes markets such as China, Australia and Korea. Europe accounted for 12 percent of sales, and other international markets, including the United Arab Emirates and Russia, accounted for 4 percent.

At its glamorous New York flagship store on Fifth Avenue, the company says more than 40 percent of its sales come from international tourists. And across the rest of its U.S. stores, foreign tourist spending accounts for about 25 percent of annual sales.

"It's going to be a sizable headwind," said Brian Yarbrough, senior analyst at investment firm Edward Jones.

Tiffany said it's worldwide net sales were 1 percent below the prior year; if not for the impact of the strong dollar, sales would have been up 3 percent. And given that the dollar is not expected to soften any time soon, the "little blue box" retailer has cut its outlook for the rest of 2015.