With every company in North America looking to expand beyond its borders, it can be interesting to look at a company that’s already made the move. Tiffany & Co. (NYSE:TIF) is a great example of an American brand that, simply put, isn’t super-American anymore. The company has delved into the global market, and has found success, especially in Asia.
Last quarter, the company’s Asia-Pacific and Japan (which is both Asian and Pacific, but who’s counting) regions accounted for 41% of total revenue . America still made up the largest chunk, but it didn’t hit 50% of the total. So what does that mean for Tiffany & Co. (NYSE:TIF) investors, and for the business? And is there anything to be learned from Tiffany & Co. (NYSE:TIF)’s successes and failures?
New money in Asia
“The rise of the middle class in China” is a fun phrase, and economists, investors, and academics love it. A Google search returned over 250,000 hits for the exact phrase, in fact. The huge influx of new money to a middle class market is a gold mine for a company like Tiffany & Co. (NYSE:TIF). One of the most important features of the middle class is that it’s focused on moving up. That means that consumers are looking for aspirational purchases, and Tiffany is a perfect target.
Tiffany & Co. (NYSE:TIF) has all the things that make for a great upwardly mobile product. You wear it, so everyone else can see it. It has a strong brand name and style, with its branding alone valued at over $5 billion by Interbrand. And it sells products at an approachable price point. Tiffany & Co. (NYSE:TIF) has been pushing its average price up recently, which has driven increased sales, but it still offers a wide selection of branded products between $100 and $200 — accessible, but not cheap.
Other retail companies, like Michael Kors Holdings Ltd (NYSE:KORS) and Coach, Inc. (NYSE:COH), are trying to play the same game with China’s increasingly capitalized population. Michael Kors Holdings Ltd (NYSE:KORS), in particular, is having success across Asia. The company increased revenue by 96% in its non-American or European regions. Michael Kors Holdings Ltd (NYSE:KORS) has used many smaller items to drive traffic, and the push is already starting for watches in Asia — something to keep an eye out for next week when the company drops its next earnings report.
Coach, Inc. (NYSE:COH) may have put too much effort into its Asian bet, with its U.S. focus slipping in recent quarters. Estimates now say that Japan accounts for as much as 50% of total international sales at Coach, Inc. (NYSE:COH). That focus could come back to bite the company, as weakness in the yen means a damper on bottom-line growth.