Tiffany Reports First Quarter Results; Worldwide Sales Rise 22% and E.P.S. Up Sharply
NEW YORK, May 27, 2010 (BUSINESS WIRE) -- Worldwide sales at Tiffany & Co. (NYSE: TIF) increased 22% in the first quarter ended April 30, 2010 due to growth in most regions and product categories. As a result of the strong, and higher-than-expected, sales growth and operating margin, net earnings more than doubled to $0.50 per diluted share.
In the three months (first quarter) ended April 30, 2010:
Michael J. Kowalski, chairman and chief executive officer, said, "Our business performed exceptionally well in the first quarter, continuing the broad-based improvement we began to experience in the second half of 2009. Sales growth was again achieved in most countries and product categories, as consumers around the world continued to turn to those brands they can trust, authentic luxury brands with a legacy of excellence in design and craftsmanship."
Effective with this release, the Company is expanding its reporting of sales by geographical segments, in order to align with changes in its organizational and management reporting structure. Specifically, the Company is now reporting results in Japan separately from the rest of the Asia-Pacific region, and wholesale sales to independent distributors for resale in certain emerging markets (such as Russia and the Middle East) that were previously included in Europe and Asia-Pacific are now included in the "Other" segment. Prior-year results have been restated for this change. The Company has posted restated sales results by quarter for 2009 and 2008 on its website (www.tiffany.com, and click on "investors" followed by "reportable segments").
Net sales by segment were as follows:
Other financial highlights were:
Mr. Kowalski continued, "We are taking advantage of opportunities related to store expansion, new product introductions and expanded marketing communications in order to grow Tiffany's worldwide presence and market share, and we have considerable financial strength as evidenced by our two most recent dividend increases of 18% and 25%. We are very encouraged with first quarter results, but believe it is prudent to maintain at least a modicum of caution in our outlook due to global economic uncertainties. In our second quarter to-date, consolidated worldwide sales are growing in line with our objective. Based on first quarter results exceeding our expectations, we are increasing our net earnings outlook to $2.55 - $2.60 per diluted share, from $2.45-$2.50. This new outlook excludes nonrecurring items, such as expenses related to the pending relocation of our New York headquarters staff, as well as the first quarter's net tax benefit, which in total will reduce earnings in 2010 by approximately $0.09 per diluted share; our previous earnings forecast did not factor in any such items."
Management's outlook for fiscal 2010 is based on the following assumptions which may or may not prove valid:
|a)||A worldwide sales increase of approximately 11%;|
|b)||By region, sales are expected to increase by a low-double-digit percentage in the Americas, to increase by a mid-twenties percentage in Asia-Pacific, to decline by a low-single-digit percentage in Japan and to increase by a high-single-digit percentage in Europe. Other sales are expected to be equal to the prior year;|
|The opening of 16 new Company-operated stores (six in the Americas, eight in Asia-Pacific and two in Europe);|
|d)||An increase in the operating margin primarily due to a higher gross margin, as well as an improved ratio of SG&A expenses to sales;|
|e)||Interest and other expenses, net of approximately $50 million;|
|f)||An effective income tax rate of approximately 35%;|
|g)||Net earnings from continuing operations of $2.55 - $2.60 per diluted share (excluding nonrecurring items); and|
|h)||A high-single-digit percentage increase in net inventories.|
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 2010 financial results on August 27, 2010 with a conference call at 8:30 a.m. (Eastern Time). 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 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, net earnings and inventories. 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 2009 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
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:
First Quarter 2010 vs. 2009
Comparable Store Sales:
Net Earnings from Continuing Operations
The accompanying press release presents net earnings from continuing operations and highlights current-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, 2010. 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
Three Months Ended
(in thousands, except per share amounts)
Net earnings from continuing
|$ 64,425||$ 0.50||$ 27,443||$ 0.22|
|Accelerated depreciation a||594||-||-||-|
|Tax benefit, net b||(3,096)||(0.02)||-||-|
Net earnings from continuing
|$ 61,923||$ 0.48||$ 27,443||$ 0.22|
|a||On a pre-tax basis includes a $72,000 charge within cost of sales and $788,000 charge within SG&A for the three months ended April 30, 2010 associated with the Company's plan to consolidate its New York headquarters' staff within one location.|
|b||Includes a $5,006,000 benefit related to a change in tax status of certain subsidiaries and a $1,910,000 charge related to the new health care reform legislation, both recorded within the provision for income taxes for the three months ended April 30, 2010.|
|TIFFANY & CO. AND SUBSIDIARIES|
|CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS|
|(Unaudited, in thousands, except per share amounts)|
|Three Months Ended April 30,|
|Cost of sales||267,608||228,396|
|Selling, general and administrative expenses||260,561||229,705|
|Earnings from continuing operations||105,417||59,514|
|Interest and other expenses, net||12,138||12,440|
|Earnings from continuing operations before income taxes||93,279||47,074|
|Provision for income taxes||28,854||19,631|
|Net earnings from continuing operations||64,425||27,443|
|Net loss from discontinued operations||-||3,102|
|Net earnings from continuing operations per share:|
|Net earnings per share:|
|Weighted-average number of common shares:|
|TIFFANY & CO. AND SUBSIDIARIES|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
(Unaudited, in thousands)
|April 30,||January 31,||April 30,|
|Cash and cash equivalents||$||673,750||$||785,702||$||303,729|
|Accounts receivable, net||139,879||158,706||135,437|
|Deferred income taxes||6,514||6,651||12,130|
|Prepaid expenses and other current assets||87,586||66,752||120,772|
|Total current assets||2,381,459||2,445,666||2,125,785|
|Property, plant and equipment, net||673,786||685,101||721,452|
|Other assets, net||363,462||357,593||315,015|
LIABILITIES AND STOCKHOLDERS' EQUITY
|Current portion of long-term debt||252,720||206,815||40,170|
|Accounts payable and accrued liabilities||164,665||231,913||163,102|
|Income taxes payable||29,256||67,513||25,324|
|Merchandise and other customer credits||64,486||66,390||64,239|
|Total current liabilities||553,992||600,273||367,034|
|Pension/postretirement benefit obligations||184,427||219,276||203,550|
|Other long-term liabilities||139,162||137,331||151,977|
|Deferred gains on sale-leasebacks||120,554||128,649||125,555|
SOURCE: Tiffany & Co.
Tiffany & Co.
James N. Fernandez, 212-230-5315
Mark L. Aaron, 212-230-5301
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