Tiffany & Co. (NYSE: TIF) today reported its financial
results for the three months (“second quarter”) ended July 31,
2015. Worldwide net sales rose 7% on a constant-exchange-rate basis
(see “Non-GAAP Measures” schedule); as reported, sales were
approximately equal to the prior year due to the negative effect
from the strength of the U.S. dollar. A decline of 16% in net
earnings, as reported, included an impairment charge related to a
loan to a diamond mining company; excluding the charge, net
earnings declined 10% (see “Non-GAAP Measures” schedule), in line
with management’s expectation. Management now expects net earnings
for the year ending January 31, 2016 to be 2%-5% below last year’s
$4.20 per diluted share (excluding charges in both years).
In the second quarter:
- Worldwide net sales were $991 million
versus $993 million in the prior year. 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), both worldwide net sales and comparable store
sales increased 7% due to growth in Japan, Europe and Asia-Pacific,
as well as increased sales of fashion gold jewelry and statement
jewelry.
- Net earnings of $105 million, or $0.81
per diluted share, were 16% below the $124 million, or $0.96 per
diluted share, earned a year ago, due to higher SG&A (selling,
general and administrative) expenses which included an expected
increase in marketing spending, as well as unfavorable effects from
the strong U.S. dollar and the impairment charge of $0.05 per
diluted share recorded for a loan to a diamond mining company.
Excluding the impairment charge, net earnings (see “Non-GAAP
Measures” schedule) declined 10% to $0.86 per diluted share, in
line with management’s expectation.
In the six months (“first half”) ended
July 31:
- Worldwide net sales declined 3% to
approximately $2 billion. However, on a constant-exchange-rate
basis, worldwide net sales increased 4% and comparable store sales
rose 3%.
- Net earnings of $210 million, or $1.62
per diluted share, were 16% lower than the $250 million, or $1.92
per diluted share, a year ago, due to higher SG&A expenses, as
well as unfavorable effects from the strong U.S. dollar and the
impairment charge noted above. Excluding the charge, net earnings
(see “Non-GAAP Measures” schedule) declined 14%, in line with
management’s expectation.
Frederic Cumenal, chief executive officer, said, “We entered
this year expecting translation and tourism-related pressures on
sales and earnings from the exceptionally strong U.S. dollar, as
well as challenging economic conditions in certain markets. While
the adverse effects from the strong dollar have been even more
significant than initially expected, we met our overall
expectations in the first half of the year. We are pleased with
responses to new designs, including our Tiffany T jewelry and CT60™
watch collections, and are excited about upcoming additions being
made to bolster sales across jewelry categories and price points.
Tiffany also expanded its global presence during the quarter by
opening six stores across the Americas, Asia-Pacific and
Europe.”
Net sales highlights by region were as
follows:
- In the Americas, on a
constant-exchange-rate basis both total sales and comparable store
sales in the second quarter were equal to the prior year, while in
the first half total sales rose 1% and comparable store sales were
unchanged. In both periods, higher sales to U.S. customers
contrasted with lower foreign tourist spending in the U.S. which
management attributes to the strong U.S. dollar, and there was
healthy comparable store sales growth in Canada and Latin America.
As reported in U.S. dollars, total sales of $475 million in the
second quarter were 2% below the prior year and sales of $918
million in the first half were approximately equal to last
year.
- In the Asia-Pacific region, on a
constant-exchange-rate basis total sales and comparable store sales
in the second quarter rose 9% and 6%, respectively, while total
sales and comparable store sales rose 6% and 4% in the first half.
In both periods, double-digit sales growth in China and Australia
was combined with mixed performance in other markets. As reported
in U.S. dollars, total sales rose 4% to $245 million in the second
quarter and 1% to $504 million in the first half.
- In Japan, on a constant-exchange-rate
basis total sales and comparable store sales in the second quarter
increased 27% and 21%, respectively, benefiting from higher sales
to foreign tourists; in the first half total sales were unchanged
and comparable store sales declined 6%. Results this year have
fluctuated compared with volatile sales trends in last year’s first
half when comparable store sales on a constant-exchange-rate basis
had increased 30% in the first quarter, reflecting a surge in
consumer spending prior to an increase in Japan’s consumption tax
on April 1, 2014, and then declined 13% in the second quarter. As
reported in U.S. dollars, total sales in Japan rose 5% to $125
million in the second quarter, and declined 16% to $247 million in
the first half.
- In Europe, on a constant-exchange-rate
basis both total sales and comparable store sales in the second
quarter rose 19%, as growth in the U.K. and across the continent
largely benefitted from higher spending by foreign tourists and, to
a lesser extent, an increase in spending by local customers; total
sales and comparable store sales in the first half rose 20% and
18%, respectively. As reported in U.S. dollars, total sales in
Europe rose 2% to $123 million in the second quarter and 2% to $225
million in the first half.
- Other sales on a constant-exchange-rate
basis in the second quarter declined 27% in total due to lower
wholesale sales of diamonds but rose 8% on a comparable store sales
basis; in the first half total sales declined 12% but comparable
store sales rose 4%. As reported in U.S. dollars, Other sales
declined 33% to $23 million in the second quarter and declined 19%
to $58 million in the first half.
- Tiffany opened six Company-operated
stores in the second quarter: in Geneva, Switzerland; two in China
in Shanghai and Hangzhou; in Bangkok, Thailand; in Macau; and in
Ottawa, Canada. At July 31, 2015, the Company operated 304 stores
(124 in the Americas, 79 in Asia-Pacific, 56 in Japan, 39 in
Europe, and included in Other sales are five in the United Arab
Emirates and one in Russia), versus 293 stores a year ago (122 in
the Americas, 72 in Asia-Pacific, 55 in Japan, 38 in Europe, and
five in the U.A.E. and one in Russia).
Other financial highlights:
- Gross margin (gross profit as a
percentage of net sales) of 59.9% in the second quarter was equal
to the prior year, while gross margin of 59.5% in the first half
was modestly above 59.1% a year ago. Year-over-year comparisons
benefited from a decline in wholesale sales of diamonds and
favorable product input costs, offset by a shift in sales mix to
higher-priced, relatively lower-margin products. In addition,
retail price increases have been offset by the negative effect of
the strong U.S. dollar.
- SG&A expenses rose 9% in the second
quarter and 7% in the first half, due to higher marketing expenses
and increased costs related to store occupancy and depreciation, as
well as increased labor expenses (including costs related to the
Company’s U.S. pension and postretirement plans). SG&A expense
growth in both periods included a $10 million impairment charge;
excluding that charge (see “Non-GAAP Measures” schedule), SG&A
expenses rose 6% in both periods. Excluding both that charge and
the translation effect from the strong U.S. dollar, SG&A
expenses would have increased 11% in both the second quarter and
first half.
- Interest and other expenses, net were
$14 million in the second quarter and $23 million in the first
half, compared with $16 million and $32 million in the respective
prior-year periods. The declines in both periods reflected lower
interest expense resulting from the redemption of long-term debt in
October 2014 by using proceeds from the issuance of lower-rate
long-term debt. In addition, the second quarter was affected by
foreign currency transaction losses.
- The effective tax rates were 34.2% in
the second quarter and 34.4% in the first half, compared with
respective rates of 35.5% and 35.3% last year.
- Cash and cash equivalents and
short-term investments were $771 million at July 31, 2015 compared
with $398 million a year ago. Total debt (short-term and long-term)
as a percentage of stockholders’ equity was 37% and 35% at July 31,
2015 and 2014, respectively.
- Net inventories of $2.4 billion at July
31, 2015 were 7% lower than the prior year, and the decline was 2%
when excluding the translation effect of the strong U.S. dollar,
due to reduced inventory purchases.
- Capital expenditures of $98 million in
the first half were slightly above the prior year.
- The Company repurchased its shares at
total costs of $23 million in the second quarter (average cost of
$90 per share) and $56 million in the first half (average cost of
$88 per share). At July 31, 2015, approximately $217 million
remained authorized for repurchases under a $300 million,
three-year program that expires in March 2017.
Mr. Cumenal added, “In light of the difficult environment
exacerbated by the strong dollar and ongoing external
uncertainties, we are tempering our full year earnings forecast.
However, we remain focused on pursuing longer-term growth
opportunities that strengthen Tiffany’s position among the world’s
important luxury brands.”
Full Year Outlook:
For the year ending January 31, 2016, Management now expects net
earnings to be 2%-5% below last year’s $4.20 per diluted share
(excluding the loan impairment charge in the second quarter of 2015
and a debt extinguishment charge in 2014). This forecast assumes no
growth in net earnings in the third quarter (excluding the debt
extinguishment charge referenced above in the prior year’s quarter)
and a resumption of growth in the fourth quarter. Also for the full
year, this forecast does not assume recording any further similar
loan impairment charges; this forecast does continue to assume
inventories increasing at a rate below sales growth; capital
expenditures of $260 million; and free cash flow in excess of $400
million. All assumptions are approximate and may or may not prove
valid.
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”).
Tiffany is the internationally-renowned jeweler founded in New
York in 1837. Through its subsidiaries, Tiffany & Co.
manufactures products and operates TIFFANY & CO. retail stores
worldwide, and also 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.
Next Scheduled Announcement:
The Company expects to report its third quarter results on
November 24, 2015. To be notified of future announcements, please
register at http://investor.tiffany.com (“E-Mail Alerts”).
Forward-Looking Statements:
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,
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 United States, regional instability and conflict that could
disrupt tourist travel and local consumer spending, weakening
foreign currencies, changes in the Company's product or geographic
sales mix and changes in costs or reduced supply availability of
diamonds and precious metals. Please also see the Company's risk
factors, as they may be amended from time to time, set forth in the
Company's filings with the Securities and Exchange Commission,
including the Company’s most recently filed Annual Report on Form
10-K, for a discussion of these and other factors that could cause
actual results to differ materially. The Company undertakes no
obligation to update or revise any forward-looking statements to
reflect subsequent events or circumstances, except as required by
applicable law or regulation.
TIFFANY & CO. AND SUBSIDIARIES
(Unaudited)
NON-GAAP MEASURES
The Company reports information in accordance with U.S.
Generally Accepted Accounting Principles (“GAAP”). The Company's
management does not, nor does it suggest that investors should,
consider 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 net sales reflect either a
translation-related benefit from strengthening foreign currencies
or a detriment from a strengthening U.S. dollar. Internally,
management monitors and measures 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 following table reconciles the sales
percentage increases (decreases) from the GAAP to the non-GAAP
basis versus the previous year:
Second Quarter 2015 vs. 2014 First Half 2015 vs. 2014
GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
GAAPReported TranslationEffect Constant-Exchange-Rate
Basis
Net
Sales:
Worldwide — % (7 )% 7 % (3 )% (7 )% 4 % Americas (2 )% (2 )% — % —
% (1 )% 1 % Asia-Pacific 4 % (5 )% 9 % 1 % (5 )% 6 % Japan 5 % (22
)% 27 % (16 )% (16 )% — % Europe 2 % (17 )% 19 % 2 % (18 )% 20 %
Other (33 )% (6 )% (27 )% (19 )% (7 )% (12 )%
Comparable Store
Sales:
Worldwide (1 )% (8 )% 7 % (4 )% (7 )% 3 % Americas (2 )% (2 )% — %
(1 )% (1 )% — % Asia-Pacific 1 % (5 )% 6 % — % (4 )% 4 % Japan 1 %
(20 )% 21 % (20 )% (14 )% (6 )% Europe 1 % (18 )% 19 % (1 )% (19 )%
18 % Other (5 )% (13 )% 8 % (6 )% (10 )% 4 %
Net Earnings
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 at July 31, 2015.
The following tables reconcile certain GAAP amounts to non-GAAP
amounts:
(in millions, except per share amounts) GAAP
Impairment charge a
(decrease)/
increase
Non-GAAP Three months ended July 31, 2015 Selling, general
and administrative expenses $ 420.2 $ (9.6 ) $ 410.6 Earnings from
operations 172.8 9.6 182.4 Net earnings 104.9 6.3 111.2 Diluted
earnings per share 0.81 0.05 0.86 Six months ended July 31,
2015 Selling, general and administrative expenses $ 819.2 $ (9.6 )
$ 809.6 Earnings from operations 342.8 9.6 352.4 Net earnings 209.7
6.3 216.0 Diluted earnings per share 1.62 0.05 1.67
a In the three and six months ended July 31, 2015, the Company
recorded an impairment charge related to a financing arrangement
with Koidu Limited.
TIFFANY & CO. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
(Unaudited, in millions, except per share
amounts)
Three Months Ended July 31, Six Months Ended July 31,
2015 2014
2015 2014 Net sales
$
990.5 $ 992.9
$ 1,953.0 $ 2,005.1 Cost
of sales
397.5 397.7
791.0 820.4
Gross profit
593.0 595.2
1,162.0 1,184.7
Selling, general and administrative expenses
420.2
386.7
819.2 766.4 Earnings from
operations
172.8 208.5
342.8 418.3 Interest
and other expenses, net
13.6 16.1
22.9
32.4 Earnings from operations before income taxes
159.2 192.4
319.9 385.9 Provision for income
taxes
54.3 68.3
110.2 136.2
Net earnings
$ 104.9 $ 124.1
$ 209.7 $ 249.7 Net earnings per share:
Basic
$ 0.81 $ 0.96
$
1.62 $ 1.93 Diluted
$ 0.81 $
0.96
$ 1.62 $ 1.92
Weighted-average number of common shares: Basic
129.0
129.3
129.1 129.1 Diluted
129.6 129.9
129.7
129.9
TIFFANY & CO. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, in millions)
July 31, 2015 January 31,2015
July 31,2014
ASSETS Current assets: Cash
and cash equivalents and short-term investments
$
771.4 $ 731.5 $ 398.4 Accounts receivable, net
180.3
195.2 190.3 Inventories, net
2,357.7 2,362.1 2,531.5
Deferred income taxes
101.4 102.6 104.9 Prepaid expenses and
other current assets
202.9 220.0 225.9
Total current assets
3,613.7 3,611.4 3,451.0
Property, plant and equipment, net
898.4 899.5 857.3 Other
assets, net
668.4 669.7 627.5
$
5,180.5 $ 5,180.6 $ 4,935.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Short-term borrowings
$ 196.8 $
234.0 $ 275.4 Accounts payable and accrued liabilities
310.4
318.0 300.8 Income taxes payable
38.3 39.9 28.4 Merchandise
credits and deferred revenue
73.9 66.1 65.5
Total current liabilities
619.4 658.0 670.1
Long-term debt
878.6 882.5 750.1 Pension/postretirement
benefit obligations
538.9 524.2 279.5 Other long-term
liabilities
189.4 200.7 213.8 Deferred gains on
sale-leasebacks
59.5 64.5 77.9 Stockholders’ equity
2,894.7 2,850.7 2,944.4
$
5,180.5 $ 5,180.6 $ 4,935.8
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150827005234/en/
TIFFANY & CO.Mark L. Aaron,
212-230-5301mark.aaron@tiffany.com
Tiffany (NYSE:TIF)
Historical Stock Chart
From Feb 2024 to Mar 2024
Tiffany (NYSE:TIF)
Historical Stock Chart
From Mar 2023 to Mar 2024