Company Website:
http://www.tiffany.com
NEW YORK -- (Business Wire)
Tiffany & Co. (NYSE: TIF) today reported that in its third quarter
worldwide net sales were $853 million and net earnings were $63 million,
or $0.49 per diluted share. Management updated its full year financial
outlook.
In the three months (“third quarter”) ended
October 31, 2012:
-
Worldwide net sales increased 4% to $853 million. On a
constant-exchange-rate basis that excludes the effect of translating
foreign-currency-denominated sales into U.S. dollars (see “Non-GAAP
Measures” schedule), worldwide net sales rose 5% and comparable store
sales increased 1%.
-
Net earnings declined 30% to $63 million, or $0.49 per diluted share,
versus $90 million, or $0.70 per diluted share, in last year’s third
quarter.
In the nine months (“year-to-date”) ended October
31, 2012:
-
Worldwide net sales of $2.6 billion were 4% higher than last year. On
a constant-exchange-rate basis, worldwide net sales rose 5% and
comparable store sales rose 1%.
-
Net earnings declined 9% to $237 million, or $1.85 per diluted share,
from $261 million, or $2.02 per diluted share, last year.
-
Net earnings in 2011’s comparable nine-month period had included $26
million, or $0.20 per diluted share, for nonrecurring items related to
the relocation of Tiffany’s New York headquarters staff. Excluding
those nonrecurring items, net earnings would have been 18% below last
year.
Michael J. Kowalski, chairman and chief executive officer, said, “Three
months ago, we had anticipated that third quarter results would be
affected by continued economic weakness in many markets as well as by
challenging comparisons to last year when net sales were up 21% and net
earnings had increased 52% excluding nonrecurring items. However, gross
margin was weaker than we expected and Tiffany’s effective tax rate was
higher than we expected. As a result, net earnings were below our
expectations.”
Net sales highlights were as follows:
-
Sales in the Americas region increased 3% to $400 million in the third
quarter and 2% to $1.2 billion in the year-to-date. On a
constant-exchange-rate basis, total sales also rose 3% in the quarter
and 2% in the year-to-date; on that basis, comparable store sales
increased 1% in the quarter and declined 2% in the year-to-date (sales
in the New York flagship store rose 5% in the quarter and declined 3%
in the year-to-date, while comparable branch store sales declined 1%
in both periods). In last year’s third quarter, comparable store sales
on a constant-exchange-rate basis had increased 24% in the New York
flagship store and 13% in the branch stores. Internet and catalog
sales increased 3% in the third quarter and 2% in the year-to-date.
-
In the Asia-Pacific region, total sales increased 2% to $188 million
in the third quarter and 6% to $557 million in the year-to-date. On a
constant-exchange-rate basis, total sales also increased 2% in the
quarter due to mixed performance across the region and 6% in the
year-to-date; on that basis, comparable store sales declined 4% in the
quarter (on top of a 36% increase last year) and were fractionally
higher in the year-to-date.
-
In Japan, total sales of $147 million in the third quarter were
fractionally above the prior year while sales increased 8% to $447
million in the year-to-date. On a constant-exchange-rate basis, total
sales increased 3% in the quarter and 8% in the year-to-date; on that
basis, comparable store sales rose 5% in the quarter and 9% in the
year-to-date.
-
Sales in Europe increased 6% to $98 million in the third quarter and
2% to $286 million in the year-to-date. Sales growth in most
continental European countries offset a modest decline in U.K. sales.
On a constant-exchange-rate basis, total sales rose 11% in the quarter
and 9% in the year-to-date; on that basis, comparable store sales rose
8% in the quarter (on top of a 6% increase last year) and rose 3% in
the year-to-date.
-
Other sales increased 73% to $21 million in the third quarter,
reflecting the conversion in July of five TIFFANY & CO. stores in the
United Arab Emirates from independently-operated distribution to
Company-operated retail stores. Other sales rose 24% to $49 million in
the year-to-date.
-
The Company added 12 stores in the third quarter: seven in the
Americas in Soho, Manhattan, San Francisco and Toronto, as well as
four department-store boutiques in Canada that were converted to
Company-operated locations; three in Asia-Pacific in Harbin, China,
Shenyang, China and Singapore; one in Europe in Prague, Czech
Republic; and one in Chiba, Japan. At October 31, 2012, the Company
operated 272 stores (113 in the Americas, 64 in Asia-Pacific, 56 in
Japan, 34 in Europe and five in the U.A.E.), compared with 243 stores
(101 in the Americas, 55 in Asia-Pacific, 55 in Japan and 32 in
Europe) a year ago.
Other financial highlights:
-
Gross margins (gross profit as a percentage of net sales) were 54.4%
in the third quarter and 56.0% in the year-to-date. These compare
unfavorably to 57.9% and 58.4% in the respective prior-year periods.
The declines largely resulted from continued high precious metal and
diamond costs, sales mix favoring higher-priced, lower margin
products, and reduced sales leverage on fixed costs. Sales mix was
affected by, among other items, lower-than-expected sales of silver
jewelry.
-
In the third quarter, SG&A (selling, general and administrative)
expenses increased 5% largely due to higher store occupancy and
marketing costs. In the year-to-date, SG&A expenses rose 1%; however,
if nonrecurring costs related to the 2011 relocation of Tiffany’s New
York headquarters staff were excluded, SG&A expense would have
increased 6% in the year-to-date primarily due to higher store
occupancy, labor and marketing costs.
-
Other expenses, net were $15 million in the third quarter, compared
with $10 million in the prior year, and were $40 million in the
year-to-date, compared with $30 million last year. The increases in
both periods were due to higher interest expense.
-
The effective income tax rate was 38.4% in the third quarter, versus
33.9% a year ago. This increase was primarily due to the true-up of
the prior year’s tax provision upon filing tax returns, as well as
differences in the geographical mix of earnings. In the year-to-date,
the rate was 35.6%, versus 33.6% a year ago when the tax rate
benefitted from the reversal of a valuation allowance for certain
deferred tax assets.
-
Cash and cash equivalents and short-term investments totaled $346
million at October 31, 2012, versus $297 million a year ago.
Short-term and long-term debt totaled $978 million at October 31, 2012
and represented 40% of stockholders’ equity, compared with $709
million and 31% a year ago.
-
Net inventories were $2.3 billion at October 31, 2012, or 11% higher
than a year ago, primarily due to growth in finished goods inventory.
This primarily reflected new store openings, expanded product
assortments and higher product acquisition costs.
-
In the year-to-date, the Company has spent $54 million to repurchase
813,000 shares of its Common Stock at an average cost of $66.54 per
share. The Company did not repurchase any shares in the third quarter.
Mr. Kowalski added, “We continue to maintain a cautious near-term
outlook about global economic conditions. However, we expect to see
improving results in this holiday season, partly benefiting from easing
year-over-year sales comparisons, but also tied to the success of new
TIFFANY & CO. stores we’ve added this year, new product introductions
and more product-focused marketing communications.”
Outlook for 2012:
For the year ending January 31, 2013, management expects net earnings of
$409-$435 million, or $3.20-$3.40 per diluted share, compared with the
previous forecast of $3.55-$3.70 per diluted share. This forecast is
based on the following assumptions (which are approximate and may or may
not prove valid):
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a)
|
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Worldwide net sales (in U.S. dollars) increasing 5-6% versus the
previous expectation of 6-7% growth.
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b)
| |
Adding a total of 28 (net) Company-operated stores including 13 in
the Americas, eight in Asia-Pacific, two in Europe, and commencing
operation of five stores in the United Arab Emirates. This includes
25 (net) stores already added in the year-to-date.
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| | |
c)
| |
Operating margin below the prior year due to a decline in the gross
margin.
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d)
| |
Interest and other expenses, net of approximately $53-55 million.
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e)
| |
An effective income tax rate of approximately 35%.
|
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f)
| |
In addition, management expects net inventories to increase 10% in
the full year and capital expenditures of $230 million, both
unchanged from the previous forecasts.
|
Today’s Conference Call:
The Company will conduct a conference call today at 8:30 a.m. (Eastern
Time) to review actual results and the outlook. Please click on http://investor.tiffany.com
(“Events and Presentations”).
Next Scheduled Announcement:
The Company expects to report its November-December holiday sales
results on Thursday January 10, 2013. To be notified of future
announcements, please register at http://investor.tiffany.com(“E-Mail Alerts”).
Tiffany & Co. operates jewelry stores and manufactures products through
its subsidiary corporations. Its principal subsidiary is Tiffany and
Company. The Company operates TIFFANY & CO. retail stores in the
Americas, Asia-Pacific, Japan, Europe and the United Arab Emirates, and
also engages in direct selling through Internet, catalog and business
gift operations. For more information, visit www.tiffany.com
or call the shareholder information line at 800-TIF-0110.
This document contains certain “forward-looking” statements concerning
the Company’s objectives and expectations with respect to sales,
products, store openings, operating margin, interest and other expenses,
the effective income tax rate, net earnings, inventories, growth
opportunities and capital expenditures. Actual results might differ
materially from those projected in the forward-looking statements.
Information concerning risk factors that could cause actual results to
differ materially is set forth in the Company’s Form 10-K, 10-Q and 8-K
reports filed with the Securities and Exchange Commission. The Company
undertakes no obligation to update or revise any forward-looking
statements to reflect subsequent events or circumstances.
TIFFANY & CO. AND SUBSIDIARIES
(Unaudited)
NON-GAAP MEASURES
Net Sales
The Company’s reported sales reflect either a translation-related
benefit from strengthening foreign currencies or a detriment from a
strengthening U.S. dollar.
The Company reports information in accordance with U.S. Generally
Accepted Accounting Principles (“GAAP”). Internally, management monitors
its sales performance on a non-GAAP basis that eliminates the positive
or negative effects that result from translating sales made outside the
U.S. into U.S. dollars (“constant-exchange-rate basis”). Management
believes this constant-exchange-rate basis provides a more
representative assessment of sales performance and provides better
comparability between reporting periods.
The Company’s management does not, nor does it suggest that investors
should, consider such non-GAAP financial measures in isolation from, or
as a substitute for, financial information prepared in accordance with
GAAP. The Company presents such non-GAAP financial measures in reporting
its financial results to provide investors with an additional tool to
evaluate the Company’s operating results. The following table reconciles
sales percentage increases (decreases) from the GAAP to the non-GAAP
basis versus the previous year:
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| | | |
Third Quarter 2012 vs. 2011
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Year-to-Date 2012 vs. 2011
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| | | | | | | | |
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Constant-
| | | | |
|
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| |
|
|
|
Constant-
|
| | | |
GAAP
| | | |
Translation
| | | |
Exchange-Rate
| | | |
GAAP
| | | |
Translation
| | | |
Exchange-Rate
|
| | | |
Reported
|
|
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|
Effect
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Basis
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|
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Reported
|
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|
Effect
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Basis
|
Net Sales: | | | | | | | | | | | | | | | | | | | | | | | | |
Worldwide
| | | |
4
|
%
| | | |
(1
|
)%
| | | |
5
|
%
| | | |
4
|
%
| | | |
(1
|
)%
| | | |
5
|
%
|
Americas
| | | |
3
|
%
| | | |
–
| | | | |
3
|
%
| | | |
2
|
%
| | | |
–
| | | | |
2
|
%
|
Asia-Pacific
| | | |
2
|
%
| | | |
–
| | | | |
2
|
%
| | | |
6
|
%
| | | |
–
| | | | |
6
|
%
|
Japan
| | | |
–
| | | | |
(3
|
)%
| | | |
3
|
%
| | | |
8
|
%
| | | |
–
| | | | |
8
|
%
|
Europe
| | | |
6
|
%
| | | |
(5
|
)%
| | | |
11
|
%
| | | |
2
|
%
| | | |
(7
|
)%
| | | |
9
|
%
|
Comparable Store Sales: | | | | | | | | | | | | | | | | | | | | | | | | |
Worldwide
| | | |
–
| | | | |
(1
|
)%
| | | |
1
|
%
| | | |
–
| | | | |
(1
|
)%
| | | |
1
|
%
|
Americas
| | | |
–
| | | | |
(1
|
)%
| | | |
1
|
%
| | | |
(2
|
)%
| | | |
–
| | | | |
(2
|
)%
|
Asia-Pacific
| | | |
(3
|
)%
| | | |
1
|
%
| | | |
(4
|
)%
| | | |
–
| | | | |
–
| | | | |
–
| |
Japan
| | | |
2
|
%
| | | |
(3
|
)%
| | | |
5
|
%
| | | |
9
|
%
| | | |
–
| | | | |
9
|
%
|
Europe
| | | |
2
|
%
| | | |
(6
|
)%
| | | |
8
|
%
| | | |
(3
|
)%
| | | |
(6
|
)%
| | | |
3
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net Earnings
The accompanying press release presents net earnings and highlights
prior year nonrecurring items in the text. Management believes excluding
such items presents the Company’s year-to-date results on a more
comparable basis to the corresponding period in the prior year, thereby
providing investors with an additional perspective to analyze the
results of operations of the Company at October 31, 2012. The following
table reconciles GAAP net earnings and net earnings per diluted share
(“EPS”) to non-GAAP net earnings and net earnings per diluted share, as
adjusted:
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Nine Months Ended
| | | |
Nine Months Ended
|
| | | |
October 31, 2012
|
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|
October 31, 2011
|
| | | |
$
|
|
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|
Diluted
| | | |
$
|
|
|
|
Diluted
|
(in thousands, except per share amounts) |
|
|
|
(after tax)
|
|
|
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EPS
|
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|
|
(after tax)
|
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EPS
|
Net earnings, as reported
| | | |
$
|
236,514
| | | |
$
|
1.85
| | | |
$
|
260,795
| | | |
$
|
2.02
|
| | | | | | | | | | | | | | | | | | | |
|
Headquarters relocation a | | | |
|
—
|
|
|
|
|
—
|
|
|
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|
25,994
|
|
|
|
|
0.20
|
| | | | | | | | | | | | | | | | | | | |
|
Net earnings, as adjusted
| | | |
$
|
236,514
|
|
|
|
$
|
1.85
|
|
|
|
$
|
286,789
|
|
|
|
$
|
2.22
|
| | | | | | | | | | | | | | | |
|
a On a pre-tax basis includes charges of $213,000 within cost
of sales and $42,506,000 within selling, general and administrative
expenses for the nine months ended October 31, 2011 associated with
Tiffany’s consolidation of its New York headquarters staff within one
location.
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TIFFANY & CO. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
(Unaudited, in thousands, except per share amounts)
|
| | | | | |
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|
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
|
| | | |
|
Three Months Ended October 31,
| | | |
|
Nine Months Ended October 31,
|
| | | | | 2012 | | | | |
2011
| | | | | 2012 | | | | |
2011
|
Net sales
| | | | $ | 852,741 | | | |
$
|
821,767
| | | | $ | 2,558,480 | | | |
$
|
2,455,497
|
| | | | | | | | | | | | | | | | | | | |
|
Cost of sales
| | | | | 388,452 | | | | |
345,918
| | | | | 1,126,011 | | | | |
1,021,258
|
| | | | | | | | | | | | | | | | | | | |
|
Gross profit
| | | | | 464,289 | | | | |
475,849
| | | | | 1,432,469 | | | | |
1,434,239
|
| | | | | | | | | | | | | | | | | | | |
|
Selling, general and administrative expenses
| | | | | 346,994 | | | | |
329,672
| | | | | 1,025,609 | | | | |
1,011,556
|
| | | | | | | | | | | | | | | | | | | |
|
Earnings from operations
| | | | | 117,295 | | | | |
146,177
| | | | | 406,860 | | | | |
422,683
|
| | | | | | | | | | | | | | | | | | | |
|
Interest and other expenses, net
| | | | | 14,783 | | | | |
10,393
| | | | | 39,587 | | | | |
30,159
|
| | | | | | | | | | | | | | | | | | | |
|
Earnings from operations before income taxes
| | | | | 102,512 | | | | |
135,784
| | | | | 367,273 | | | | |
392,524
|
| | | | | | | | | | | | | | | | | | | |
|
Provision for income taxes
| | | | | 39,333 | | | | |
46,095
| | | | | 130,759 | | | | |
131,729
|
| | | | | | | | | | | | | | | | | | | |
|
Net earnings
| | | | $ | 63,179 | | | |
$
|
89,689
| | | | $ | 236,514 | | | |
$
|
260,795
|
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
|
Net earnings per share:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
Basic
| | | | $ | 0.50 | | | |
$
|
0.71
| | | | $ | 1.87 | | | |
$
|
2.04
|
Diluted
| | | | $ | 0.49 | | | |
$
|
0.70
| | | | $ | 1.85 | | | |
$
|
2.02
|
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
|
Weighted-average number of common shares:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
Basic
| | | | | 126,737 | | | | |
127,210
| | | | | 126,697 | | | | |
127,614
|
Diluted
| | | | | 127,902 | | | | |
128,812
| | | | | 127,914 | | | | |
129,329
|
| | | | | | | | | | | | | | | | | | | |
|
|
| | |
TIFFANY & CO. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Unaudited, in thousands)
|
| |
|
| | |
|
|
| | |
|
|
| | |
| | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | |
|
| | | | | October 31, | | | | |
January 31,
| | | | |
October 31,
|
| | | |
| 2012 | | | |
|
2012
| | | |
|
2011
|
ASSETS | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
Current assets:
| | | | | | | | | | | | | | | |
Cash and cash equivalents and short-term investments
| | | | $ | 345,874 | | | |
$
|
442,190
| | | |
$
|
297,364
|
Accounts receivable, net
| | | | | 160,604 | | | | |
184,085
| | | | |
170,181
|
Inventories, net
| | | | | 2,289,571 | | | | |
2,073,212
| | | | |
2,065,466
|
Deferred income taxes
| | | | | 106,744 | | | | |
83,124
| | | | |
93,790
|
Prepaid expenses and other current assets
| | | | | 180,013 | | | | |
107,064
| | | | |
117,706
|
| | | | | | | | | | | | | | |
|
Total current assets
| | | | | 3,082,806 | | | | |
2,889,675
| | | | |
2,744,507
|
| | | | | | | | | | | | | | |
|
Property, plant and equipment, net
| | | | | 800,225 | | | | |
767,174
| | | | |
752,151
|
Other assets, net
| | | | | 566,964 | | | | |
502,143
| | | | |
401,626
|
| | | | | | | | | | | | | | |
|
| | | | $ | 4,449,995 | | | |
$
|
4,158,992
| | | |
$
|
3,898,284
|
| | | | | | | | | | | | | | |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
Current liabilities:
| | | | | | | | | | | | | | | |
Short-term borrowings
| | | | $ | 196,279 | | | |
$
|
112,973
| | | |
$
|
107,830
|
Current portion of long-term debt
| | | | | 0 | | | | |
60,822
| | | | |
61,247
|
Accounts payable and accrued liabilities
| | | | | 284,189 | | | | |
328,962
| | | | |
287,012
|
Income taxes payable
| | | | | 17,958 | | | | |
60,977
| | | | |
1,459
|
Merchandise and other customer credits
| | | | | 65,996 | | | | |
62,943
| | | | |
64,360
|
| | | | | | | | | | | | | | |
|
Total current liabilities
| | | | | 564,422 | | | | |
626,677
| | | | |
521,908
|
| | | | | | | | | | | | | | |
|
Long-term debt
| | | | | 781,637 | | | | |
538,352
| | | | |
539,703
|
Pension/postretirement benefit obligations
| | | | | 322,033 | | | | |
338,564
| | | | |
212,268
|
Other long-term liabilities
| | | | | 205,720 | | | | |
186,802
| | | | |
187,635
|
Deferred gains on sale-leasebacks
| | | | | 108,962 | | | | |
119,692
| | | | |
124,047
|
Stockholders' equity
| | | | | 2,467,221 | | | | |
2,348,905
| | | | |
2,312,723
|
| | | | | | | | | | | | | | |
|
| | | | $ | 4,449,995 | | | |
$
|
4,158,992
| | | |
$
|
3,898,284
|
| | | | | | | | | | | | | | |
|
Contacts:
Tiffany & Co.
Mark L. Aaron, 212-230-5301
mark.aaron@tiffany.com
Source: Tiffany & Co.
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