Tiffany Reports First Quarter Results
In the first quarter:
Worldwide net sales declined 7% to
$891 millionand comparable store sales declined 9%. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S.dollars (see "Non-GAAP Measures"), worldwide net sales declined 7%, and comparable store sales declined 9%.
Net earnings of
$87 million, or $0.69per diluted share, included a tax benefit of $0.05per diluted share related to the settlement of a tax examination, and compared with net earnings of $105 million, or $0.81per diluted share, in the prior year.
Net sales highlights by region in the first quarter were as follows:
Americas, total sales of $403 millionwere 9% below the prior year and comparable store sales declined 10%. On a constant-exchange-rate basis total sales and comparable store sales declined 8% and 9%, respectively, with management attributing the declines to varying degrees of softness in spending by U.S.customers and foreign tourists.
Asia-Pacific region, total sales of $238 millionwere 8% below the prior year and comparable store sales declined 15%. On a constant-exchange-rate basis total sales and comparable store sales declined 5% and 12%, respectively; on that basis, total sales growth in Chinaand Koreawas offset by a continued significant decline in Hong Kongand more moderate declines in other markets.
Japan, total sales of $131 millionwere 8% above the prior year and comparable store sales increased 12%. On a constant-exchange-rate basis total sales and comparable store sales rose 1% and 5%, respectively. Management attributed the sales growth to higher spending by local customers.
Europe, total sales of $97 millionwere 9% lower than the prior year and comparable store sales declined 15%. On a constant-exchange-rate basis total sales and comparable store sales declined 7% and 14%, respectively, due to softness in most countries, led by France, that management attributed largely to lower foreign tourist spending.
Other sales declined 30% to
$22 million, and comparable store sales declined 21%, reflecting lower retail sales in the United Arab Emirates("UAE") and wholesale sales in other markets.
Tiffany opened two Company-operated stores in the first quarter (in
Europe) and closed one location (in Japan). At April 30, 2016, the Company operated 308 stores (124 in the Americas, 81 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE), compared with 298 stores a year ago (123 in the Americas, 75 in Asia-Pacific, 56 in Japan, 39 in Europe, and five in the UAE).
Other financial highlights:
- Gross margin (gross profit as a percentage of net sales) increased to 61.2% in the quarter, from 59.1% a year ago. The increase was due to favorable product input costs and the effect of a shift in sales mix towards higher-margin products, as well as price increases, partly offset by the effect of currency translation and a lack of sales leverage on fixed costs.
- SG&A expenses increased 3% in the first quarter due to higher labor, occupancy and depreciation expenses, much of which was store-related.
- The effective tax rate was 29.0% compared with 34.7% a year ago. The decline was due to a benefit related to the conclusion of a tax examination.
Cash and cash equivalents and short-term investments totaled
$790 millionat April 30, 2016, versus $715 milliona year ago. Total short-term and long-term debt as a percentage of stockholders' equity was 37% at both April 30, 2016and 2015.
Net inventories at
April 30, 2016were 2% lower than the prior year.
Capital expenditures of
$46 millioncompared with $37 millionin the prior year.
The Company spent
$78 millionin the first quarter (at an average cost of $66per share) to repurchase shares of its Common Stock. At April 30, 2016, $416 millionremained available for repurchases under a program that authorizes the repurchase of up to $500 millionof the Company's Common Stock and that expires on January 31, 2019.
Management is now forecasting full year earnings per diluted share in
2016 to decline by a mid-single-digit percentage from 2015's adjusted
earnings per diluted share (which excluded loan impairment and certain
staffing and occupancy charges - see "Non-GAAP Measures"). Management
also expects diluted EPS in the second quarter to decline by a similar
rate as occurred in the first quarter. The forecast is based on the
following full year assumptions, which are approximate and may or may
not prove valid: (i) worldwide net sales declining by a low-single-digit
percentage from the prior year; (ii) worldwide gross retail square
footage increasing 2%, net through 11 openings, 6 relocations and 10
closings; (iii) operating margin below the prior year's 19.7% (excluding
the prior year's charges - see "Non-GAAP Measures") due to an expected
increase in gross margin more than offset by SG&A expense growth; (iv)
interest and other expenses, net unchanged from 2015; (v) an effective
income tax rate slightly lower than the prior year; (vi) a modest
year-over-year strengthening of the
Today's Conference Call:
The Company will conduct a conference call today at
Next Scheduled Announcement:
The Company expects to report second quarter results on
Tiffany is the internationally-renowned jeweler founded in
The statements in this document that refer to plans and expectations for
the current fiscal year and future periods are forward-looking
statements that involve a number of risks and uncertainties. Words such
as 'expects,' 'anticipates,' 'forecasts,' 'plans,' 'believes,'
'continues,' 'may,' 'will,' and variations of such words and similar
expressions are intended to identify such forward-looking statements.
Examples of forward-looking statements include, but are not limited to,
statements we make regarding the Company's objectives, expectations and
beliefs with respect to store openings and closings, product
introductions, sales, sales growth, retail prices, gross margin,
expenses, operating margin, interest and other expenses, net, effective
income tax rate, net earnings and net earnings per share, inventories,
capital expenditures, cash flow, liquidity, currency translation and
growth opportunities. These forward-looking statements are subject to a
number of risks and uncertainties, many of which are beyond the
Company's control, which could cause the Company's actual results to
differ materially from those indicated in these forward-looking
statements. Such factors include, but are not limited to, risks from
global economic conditions, decreases in consumer confidence, the
Company's significant operations outside of
The Company reports information in accordance with
The Company's reported net sales reflect either a translation-related
benefit from strengthening foreign currencies or a detriment from a
|First Quarter 2016 vs. 2015|
Comparable Store Sales:
The accompanying press release presents net earnings and highlights expenses tied to certain items in the text. Management believes excluding such items presents the Company's 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. The following table reconciles certain GAAP amounts to non-GAAP amounts:
|(in millions, except per share amounts)||GAAP||
|Earnings from operations||760.1||37.9||8.8||806.8|
|Diluted earnings per share||3.59||0.19||0.05||3.83|
Expenses associated with impairment charges related to a financing
Expenses associated with specific cost-reduction initiatives which
included severance related to staffing reductions and subleasing of
certain office space for which only a portion of the Company's
future rent obligations will be recovered. See "Item 8. Financial
Statements and Supplementary Data - Note J - Commitments and
Contingencies" in our Annual Report on Form 10-K, filed with the
TIFFANY & CO. AND SUBSIDIARIES
Three Months Ended
|Cost of sales||345.7||393.4|
|Selling, general and administrative expenses||411.0||399.0|
|Earnings from operations||134.6||170.0|
|Interest and other expenses, net||11.5||9.3|
|Earnings from operations before income taxes||123.1||160.7|
|Provision for income taxes||35.6||55.8|
|Net earnings per share:|
|Weighted-average number of common shares:|
TIFFANY & CO. AND SUBSIDIARIES
|Cash and cash equivalents and short-term investments||$||789.9||$||886.6||$||715.4|
|Accounts receivable, net||221.5||206.4||192.5|
|Prepaid expenses and other current assets||190.7||190.4||207.6|
|Total current assets||3,522.2||3,508.4||3,478.5|
|Property, plant and equipment, net||946.0||935.8||897.0|
|Other assets, net||680.0||677.4||765.9|
LIABILITIES AND STOCKHOLDERS' EQUITY
|Current portion of long-term debt||92.5||84.2||—|
|Accounts payable and accrued liabilities||300.4||329.1||271.2|
|Income taxes payable||36.6||27.1||44.6|
|Merchandise credits and deferred revenue||68.2||67.9||72.2|
|Total current liabilities||717.8||729.9||585.1|
|Pension/postretirement benefit obligations||436.4||428.1||532.2|
|Other long-term liabilities||188.1||189.0||201.4|
|Deferred gains on sale-leasebacks||56.4||55.1||62.8|
TIF - E
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