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Tiffany Reports Third Quarter Results

NEW YORK, Nov 26, 2008 (BUSINESS WIRE) --

Tiffany & Co. (NYSE: TIF) today reported its results for the three-month period (third quarter) ended October 31, 2008. A one percent decline in worldwide sales reflected weakness in the U.S. offset by increased sales outside the U.S. Net earnings fell in comparison with the prior year, when a substantial gain was recorded on a sale and leaseback transaction.

Michael J. Kowalski, chairman and chief executive officer, said, "Customers have adjusted their spending in reaction to economic conditions and near-term uncertainties. Despite that, Tiffany maintained a high level of profitability in the third quarter and, in fact, net earnings per share rose 13% when excluding certain items from the prior year."

Net sales declined 1% to $618.2 million in the third quarter. On a constant-exchange-rate basis which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see attached "Non-GAAP Measures" schedule), worldwide net sales declined 2% and comparable store sales declined 7%.

In the nine-month period (year-to-date), net sales increased 7% to $2.0 billion. On a constant-exchange-rate basis, worldwide net sales rose 4% and comparable store sales declined 2%.

Net earnings from continuing operations in the third quarter were $43.8 million, or $0.35 per diluted share. In the prior year, net earnings from continuing operations of $103.1 million, or $0.74 per diluted share, included: (i) a pre-tax gain of $105.1 million, or $0.48 per diluted share after tax, which resulted from the Company's sale-leaseback of the building housing its Tokyo flagship store; and (ii) a $10 million contribution, or $0.04 per diluted share after tax, to The Tiffany & Co. Foundation. Excluding those prior-year-items, net earnings per share increased 13% (see attached "Non-GAAP Measures" schedule).

In the year-to-date, net earnings from continuing operations were $188.9 million, or $1.49 per diluted share, compared with $223.6 million, or $1.60 per diluted share, in the prior year. Excluding the items mentioned above, net earnings from continuing operations increased 27% over the comparable period in 2007. In 2007, discontinued operations included an after-tax charge of $22.6 million related to the sale of the Company's Little Switzerland business, as well as losses from those operations.

Net sales by geographical region were as follows:

 

Other financial highlights were:

2008/2009 Outlook:

Mr. Kowalski continued, "It is impossible to know when consumer confidence will be restored. However, even in trying times like these, we believe customers will continue to seek classic, timeless designs that do not go out of style and can be worn and enjoyed for years to come."

In November-to-date, U.S. sales have softened from levels at the end of the third quarter and the Company is forecasting a continuation of those weak trends through the fourth quarter, as well as challenging conditions, to a lesser extent, in Asia-Pacific and Europe.

Management now expects full year 2008 net earnings in a range of $2.30 - $2.50 per diluted share. The full-year earnings expectation is based on worldwide net sales ranging from a 2% decline to unchanged from 2007. Management is planning to reduce staffing in light of reduced consumer demand and to trim capital expenditures in order to achieve the most effective and prudent use of resources. Management's current 2008 earnings expectation does not include any fourth quarter, one-time charges resulting from such staff reductions.

Mr. Kowalski added, "We are still in the early stages of formulating our financial plans for 2009 but I can say that we will look for opportunities to increase market share, while simultaneously pursuing various cost reduction avenues appropriate for this environment, including a moderation in the rate of new store openings in 2009."

Today's Conference Call

The Company will host a conference call today at 8:30 a.m. (Eastern Time) to review these results and its outlook. Investors may listen at http://investor.tiffany.com ("Events and Presentations").

Next Scheduled Announcement

The Company expects to report its results for the November-December holiday period on Wednesday, January 14, 2009 with a conference call at 8:30 a.m. (Eastern Time) that day. To receive notifications of conference calls and news release alerts, please register at http://investor.tiffany.com ("E-Mail Alerts").

Tiffany & Co. operates jewelry and specialty retail stores and manufactures products through its subsidiary corporations. Its principal subsidiary is Tiffany and Company. The Company operates TIFFANY & CO. retail stores and boutiques in the Americas, Asia-Pacific and Europe and engages in direct selling through Internet, catalog and business gift operations. Other operations include consolidated results from ventures operated under trademarks or tradenames other than TIFFANY & CO. For additional information, please visit www.tiffany.com or call our 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, operating margin and earnings per share. 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 2007 Annual Report on Form 10-K and in other 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

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.

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 international sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating international sales into U.S. dollars ("constant-exchange-rate basis"). Management believes this constant-exchange-rate measure provides a more representative assessment of the sales performance and provides better comparability between reporting periods.

The following table reconciles sales percentage increases (decreases) from the GAAP to the non-GAAP basis versus the previous year:

   

Third Quarter 2008 vs. 2007

 

Year-to-Date 2008 vs. 2007

   

GAAP

Reported

 

Translation

Effect

 

Constant- Exchange-

Rate Basis

 

GAAP

Reported

 

Translation

Effect

 

Constant- Exchange-

Rate Basis

Net Sales:

                       
Worldwide   (1 )%   1 %   (2 )%   7 %   3 %   4 %
Americas   (7 )%   (1 )%   (6 )%   1 %   -     1 %
U.S.   (9 )%   -     (9 )%   (1 )%   -     (1 )%
Asia-Pacific   3 %   4 %   (1 )%   14 %   9 %   5 %
Japan   1 %   9 %   (8 )%   8 %   12 %   (4 )%
Other Asia-Pacific   9 %   (3 )%   12 %   23 %   3 %   20 %
Europe   16 %   (8 )%   24 %   30 %   2 %   28 %
                         

Comparable Store Sales:

                       
Worldwide   (6 )%   1 %   (7 )%   1 %   3 %   (2 )%
Americas   (12 )%   -     (12 )%   (4 )%   1 %   (5 )%
U.S.   (14 )%   -     (14 )%   (6 )%   -     (6 )%
Asia-Pacific   2 %   5 %   (3 )%   9 %   8 %   1 %
Japan   2 %   9 %   (7 )%   5 %   12 %   (7 )%
Other Asia-Pacific   2 %   (2 )%   4 %   15 %   3 %   12 %
Europe   3 %   (5 )%   8 %   14 %   4 %   10 %

Net Earnings

The accompanying press release presents net earnings excluding the prior-year items as discussed in items (i) -- (ii). Management believes excluding such items presents the Company's third quarter and full year results on a more comparable basis to the corresponding periods in the prior year, thereby providing investors with an additional perspective to analyze the results of operations of the Company at October 31, 2008.

The following table reconciles GAAP net earnings from continuing operations and net earnings from continuing operations per diluted share ("EPS") to the non-GAAP net earnings from continuing operations and net earnings from continuing operations per diluted share, as adjusted:

    Three Months Ended

October 31, 2008

  Three Months Ended

October 31, 2007

(in thousands, except per share amounts)   $   EPS   $   EPS
Net earnings from continuing operations, as reported   $ 43,777   $ 0.35   $ 103,102   $ 0.74
Gain on Tokyo sale-leaseback     -     -     (66,497)     (0.48)
Contribution to The Tiffany & Co. Foundation     -     -     6,025     0.04
Net earnings from continuing operations, as adjusted   $ 43,777   $ 0.35   $ 42,630   $ 0.31
                 
    Nine Months Ended

October 31, 2008

  Nine Months Ended

October 31, 2007

(in thousands, except per share amounts)   $   EPS   $   EPS
Net earnings from continuing operations, as reported   $ 188,937   $ 1.49   $ 223,638   $ 1.60
Gain on Tokyo sale-leaseback     -     -     (66,497)     (0.48)
Contribution to The Tiffany & Co. Foundation     -     -     6,025     0.04
Net earnings from continuing operations, as adjusted   $ 188,937   $ 1.49   $ 163,166   $ 1.17
 
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
                         
                         
      Three Months     Nine Months
      Ended October 31,     Ended October 31,
      2008     2007     2008     2007
Net sales   $ 618,230   $ 627,323   $ 2,018,782   $ 1,885,614
                         
Cost of sales     270,210     285,776     866,306     838,203
                         
Gross profit     348,020     341,547     1,152,476     1,047,411
                         
Other operating income     -     105,051     -     105,051
                         
Selling, general and administrative expenses     269,499     288,403     839,151     793,563
                         
Earnings from continuing operations     78,521     158,195     313,325     358,899
                         
Other expenses, net     14,453     2,306     19,305     8,139
                         
Earnings from continuing operations before income taxes     64,068     155,889     294,020     350,760
                         
Provision for income taxes     20,291     52,787     105,083     127,122
                         
Net earnings from continuing operations     43,777     103,102     188,937     223,638
                         
Loss from discontinued operations, net of tax     -     (1,555)     -     (27,547)
                         
Net earnings   $ 43,777   $ 101,547   $ 188,937   $ 196,091
                         
                         
Net earnings from continuing operations per share:                        
                         
Basic   $ 0.35   $ 0.76   $ 1.51   $ 1.64
Diluted   $ 0.35   $ 0.74   $ 1.49   $ 1.60
                         
Net earnings per share:                        
                         
Basic   $ 0.35   $ 0.75   $ 1.51   $ 1.44
Diluted   $ 0.35   $ 0.73   $ 1.49   $ 1.40
                         
                         
Weighted-average number of common shares:                        
                         
Basic     123,399     136,124     125,190     136,452
Diluted     124,899     139,487     127,053     139,943
         
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
                   
                   
    October 31,   January 31,   October 31,
      2008     2008     2007

ASSETS

                 
                   
Current assets:                  
Cash and cash equivalents and short-term investments   $ 160,376   $ 246,654   $ 391,120
Accounts receivable, net     164,269     193,974     168,678
Inventories, net     1,638,479     1,372,397     1,465,502
Deferred income taxes     33,069     20,218     15,216
Prepaid expenses and other current assets     70,375     89,072     91,682
                   
Total current assets     2,066,568     1,922,315     2,132,198
                   
Property, plant and equipment, net     738,287     748,210     757,542
Other assets, net     334,720     330,379     312,969
                   
    $ 3,139,575   $ 3,000,904   $ 3,202,709
                   

LIABILITIES AND STOCKHOLDERS' EQUITY

 

               
     

 

           
Current liabilities:                  
Short-term borrowings   $ 414,364   $ 44,032   $ 59,843
Current portion of long-term debt     100,682     65,640     5,552
Accounts payable and accrued liabilities     236,191     203,622     204,579
Income taxes payable     6,930     203,611     95,816
Merchandise and other customer credits     67,924     67,956     67,092
                   
Total current liabilities     826,091     584,861     432,882
                   
Long-term debt     306,226     343,465     397,795
Pension/postretirement benefit obligations     86,355     79,254     100,712
Other long-term liabilities     140,704     131,610     130,463
Deferred gains on sale-leasebacks     134,444     145,599     144,973
Stockholders' equity     1,645,755     1,716,115     1,995,884
                   
    $ 3,139,575   $ 3,000,904   $ 3,202,709

 

SOURCE: Tiffany & Co.

Tiffany & Co.
James N. Fernandez, 212-230-5315
or
Mark L. Aaron, 212-230-5301

 

Copyright Business Wire 2008

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