Tiffany & Co abruptly drops CEO in luxury industry's latest shake-up

By Stephanie Wong

The luxury jewelry chain had disappointing financial results and dropped its CEO just hours before it introduced a new campaign. Photo / Bloomberg
The luxury jewelry chain had disappointing financial results and dropped its CEO just hours before it introduced a new campaign. Photo / Bloomberg

Tiffany & Co. abruptly replaced Chief Executive Officer Frederic Cumenal after disappointing financial results, just hours before the jewelry chain introduced a new campaign with the first Super Bowl ad in its history.

Cumenal, 57, who had run the company since April 2015, is being succeeded on an interim basis by chairman and former CEO Michael Kowalski, Tiffany said on Sunday afternoon. The shake-up follows the departure of the jeweler's top designer three weeks ago and weak holiday sales that sent the stock tumbling.

Under Cumenal's watch, Tiffany was rocked by a slump in tourism spending and headwinds caused by the strong U.S. dollar. Sales declines in Europe and the Americas marred its holiday season. Another headache: Stepped-up security at its flagship store next to Trump Tower in New York hurt traffic.

To cope, Tiffany has been cutting costs, rolling out new products and increasing its marketing.

But the company needs to move faster, Kowalski said in a statement.

"The board believes that accelerating execution of those strategies is necessary to compete more effectively in today's global luxury market and improve performance," said Kowalski, who is 64.

Tiffany shares declined 6.6 per cent during Cumenal's tenure as CEO, which followed Kowalski's retirement in 2015. That compares with gains of 12 per cent for the Standard & Poor's 500 Index and 13 per cent for the S&P 500's consumer discretionary benchmark. Tiffany slid as much as 3.5 per cent to $77.66 on Monday.

Tiffany said last month that design director Francesca Amfitheatrof was leaving the company. It hired Reed Krakoff to the new position of chief artistic officer, tasking him with overseeing jewelry and luxury accessories. It also recently brought on a new chief financial officer, Mark Erceg. He joined in October, replacing Ralph Nicoletti, who resigned to take up the same post at Newell Brands Inc.

Cumenal's departure signals that there may be deeper problems at the company, said Brian Yarbrough, an analyst at Edward Jones & Co.

"There's uncertainty in the market, and Wall Street doesn't like uncertainty," he said.

In its latest effort to expand sales and relevance with younger shoppers, Tiffany commissioned pop singer Lady Gaga to become the face of its fashion-jewelry collection. She appeared in a Super Bowl ad Sunday -- which was shot in black and white and featured her talking about creativity and rebellion -- and performed during the game's halftime show. Tiffany also is coming up on Valentine's Day, a key selling season for the jeweler.

The timing makes Cumenal's departure especially surprising, but Tiffany said it was maintaining the financial outlook it gave in January. Earnings are expected to decline by no more than a mid-single-digit percentage in the current fiscal year, and global net sales will fall by a low-single-digit percentage.

The jeweler said in January that it didn't expect any "significant improvement" to the economic challenges this year but will focus on upgrading its customer experience, product assortment, marketing and supply chain.

The past week marked a series of management changes in the luxury industry. Ralph Lauren Corp. CEO Stefan Larsson is departing after clashing with its namesake founder over the company's creativity direction. Barneys New York replaced its CEO with Chief Operating Officer Daniella Vitale. And Riccardo Tisci, the creative director of LVMH's fashion brand Givenchy, left the company.

More management turnover could come if the sluggish sales continue at luxury companies, which are coping with aging customers, Yarbrough said.

"These companies have long histories of high-single-digit revenue growth, and if they continue to post little growth, I would expect more changes," he said. "The industry has to adapt due to changing tastes and the fact the baby boomers are retiring."

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