New York, N.Y., May 26, 2011 - Tiffany & Co. (NYSE: TIF) today reported higher-than-expected net sales and earnings growth in its first quarter ended April 30, 2011. Net sales increased 20% worldwide. Net earnings increased 26% due to the sales growth and improved margins. Management increased its earnings forecast for fiscal 2011.
Michael J. Kowalski, chairman and chief executive officer, said, "We are pleased with the very strong start to the year. We achieved healthy sales growth in most regions, were able to improve gross margin despite higher product costs and achieved a significant increase in our operating margin."
First quarter summary:
Net earnings increased 26% to $81.1 million, or $0.63 per diluted share, versus $64.4 million, or $0.50 per diluted share, in the prior year.
Earnings in the first quarter include $0.04 per share of expenses (see SG&A expenses below) related to the upcoming relocation of Tiffany's New York headquarters staff. Earnings in the first quarter of 2010 included a net tax benefit of $0.02 per share. Excluding those nonrecurring items in both years, net earnings rose 39% in the quarter (see "Non-GAAP Measures" schedule).
Net sales highlights by segment:
Other financial highlights:
Mr. Kowalski said, "We have exciting plans this year. We will open 19 new stores, introduce a broad range of compelling new products and will increase our spending on marketing communications. Worldwide sales growth in the early part of this second quarter is continuing to exceed our expectation, with solid performance in most regions. Based on the better-than-expected first quarter results, we are increasing our earnings forecast for the year to $3.45 - $3.55 per diluted share (not including nonrecurring expenses) from $3.35 - $3.45 per diluted share previously."
Outlook for 2011:
Management's outlook for the year ending January 31, 2012 is based on the following assumptions which may or may not prove valid:
a) A mid-teens percentage increase in worldwide net sales.
b) Sales assumptions by region (in U.S. dollars) include a mid-teens percentage increase in the Americas, a mid-twenties percentage increase in both Asia-Pacific and Europe, and a modest sales decline in Japan. Other sales are expected to increase approximately 25%.
c) The opening of 19 Company-operated stores including seven in the Americas, four in Europe and eight in Asia-Pacific. In addition, there is a net reduction of one location in Japan.
d) An operating margin increase of approximately one-half point due to an improved ratio of SG&A expenses (excluding nonrecurring items) to sales and a higher gross margin.
e) Interest and other expenses, net of approximately $45 million.
f) An effective income tax rate of approximately 34%.
g) A net earnings increase of 18% - 21% to $3.45 - $3.55 per diluted share (not including nonrecurring expenses). Nonrecurring expenses are related to the pending relocation of Tiffany's New York headquarters staff and are expected to reduce net earnings in 2011 by approximately $0.19 per share (with most of that expense expected to be incurred in the second quarter).
h) An increase in net inventories of more than 15%.
i) Capital expenditures of approximately $250 million.
Today's Conference Call:
The Company will host a conference call today at 8:30 a.m. (Eastern Time) to review these actual results and its outlook. Investors may listen at http://investor.tiffany.com ("Events and Presentations").
Next Scheduled Announcement:
The Company expects to report its second quarter results on Friday August 26, 2011. To receive notifications of news releases, 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 and boutiques in the Americas, Asia-Pacific, Japan and Europe and engages in direct selling through Internet, catalog and business gift operations. 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, store openings, operating margin, interest and other expenses, the effective income tax rate, net earnings, inventories 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 2010 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.
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 international sales 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:
The accompanying press release presents net earnings and highlights current-year and prior year nonrecurring items in the text. Management believes excluding such items presents the Company's first quarter 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 April 30, 2011. The following table reconciles GAAP net earnings and net earnings per diluted share ("EPS") to the non-GAAP net earnings and net earnings per diluted share, as adjusted:
James N. Fernandez
Mark L. Aaron