Tiffany & Co. (NYSE:TIF) reported its sales results for the
two months ended December 31, 2016 (“holiday period”). Worldwide
net sales of $966 million were slightly above $961 million a year
ago, with sales growth in Asia-Pacific and Japan largely offset by
lower sales in the Americas and Europe; worldwide comparable store
sales declined 2%. 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 rose 1%
from the prior year and comparable store sales declined 1%. There
were no significant variations in performance among jewelry
categories.
Frederic Cumenal, chief executive officer, said, “These overall
holiday period sales results were somewhat lower than we had
anticipated, but we continue to benefit from a favorable gross
margin and prudent expense management. Although we do not
anticipate any significant improvement in 2017 to the macroeconomic
challenges that we faced this year, we continue to focus on our
initiatives to enhance our stores and our customers’ experience,
and to add newness to our product assortment, while maintaining
effective marketing communications and a well-developed supply
chain. We believe executing on these initiatives, which are within
our control, will contribute over the long-term to strengthening
Tiffany’s competitive position among global luxury brands.”
Net sales by region were as
follows:
- In the Americas, both total sales of
$483 million and comparable store sales were 4% below the prior
year. On a constant-exchange-rate basis, total sales declined 4%
and comparable store sales declined 3%. Management attributed the
lower sales to local customer spending, with a decline in U.S.
sales exacerbated by a 14% decline at the Company’s Flagship store
on Fifth Avenue in New York, which we attribute at least partly to
post-election traffic disruptions.
- In the Asia-Pacific region, total sales
increased 7% to $200 million and comparable store sales declined
4%. On a constant-exchange-rate basis, total sales rose 9% and
comparable store sales declined 3%. Management noted strong growth
in retail sales in China and in wholesale sales in Korea, but
softness in most other markets throughout the region.
- In Japan, total sales rose 16% to $143
million and comparable store sales rose 21%, which management
attributed to higher spending by local customers. On a
constant-exchange-rate basis, total sales increased 8% and
comparable store sales rose 12%. Strong retail sales growth was
partly offset by lower wholesale sales.
- In Europe, total sales of $119 million
were 10% below the prior year and comparable store sales declined
11%. On a constant-exchange-rate basis, total sales were equal to
the prior year and comparable store sales were 4% below the prior
year. Management attributed the sales performance to weak demand
across continental Europe tied to domestic and foreign tourist
spending, and noted modest growth in local-currency sales in the
United Kingdom.
- Other sales of $20 million rose 33% and
comparable store sales declined 7% reflecting increased wholesale
sales of diamonds, offset by lower retail sales in the United Arab
Emirates (“UAE”).
- At December 31, 2016, the Company
operated 314 stores (125 in the Americas, 86 in Asia-Pacific, 55 in
Japan, 43 in Europe, and five in the UAE), versus 307 stores a year
ago (125 in the Americas, 81 in Asia-Pacific, 56 in Japan, 40 in
Europe, and five in the UAE).
Full Year 2016 Outlook:
For the full 2016 fiscal year, (i) management expects earnings
per diluted share to decline by no more than a mid-single-digit
percentage on a GAAP basis, as well as on an adjusted basis (which
in 2016 excludes a charge of approximately $0.13 per diluted share
to be recorded in the fourth quarter of 2016 related to the
impairment of capitalized costs for the development of a
replacement of the Company’s finished goods inventory management
system, and, in 2015, excluded loan impairment and certain staffing
and occupancy charges - see “Non-GAAP Measures”); and (ii)
management continues to expect worldwide net sales declining by a
low single-digit percentage from the prior year. These expectations
are approximations and are based on the Company’s plans and
assumptions, including: (i) worldwide gross retail square footage
increasing 3%, net through 11 store openings, 5 relocations and 6
closings; (ii) operating margin below the prior year due to an
anticipated increase in gross margin more than offset by SG&A
expense growth; (iii) interest and other expenses, net lower than
2015; (iv) an effective income tax rate consistent with the prior
year; (v) the U.S. dollar unchanged at current spot rates versus
other foreign currencies for the balance of the year; and (vi)
weighted average diluted shares outstanding lower than in fiscal
2015. Management also expects for the full 2016 fiscal year: net
cash provided by operating activities of more than $575 million and
free cash flow (net cash provided by operating activities less
capital expenditures - see “Non-GAAP Measures”) of more than $325
million, both of which now include a previously-unplanned and
voluntary contribution of $125 million to the Company’s U.S.
pension plan. These expectations are approximations and are based
on the Company’s plans and assumptions, including: (i) net
inventories below the prior year, (ii) capital expenditures of $240
million and (iii) net earnings in line with management’s
expectations described above.
Next Scheduled Announcement:
The Company expects to report its fourth quarter and full year
results on Friday March 17th before the market opens. To be
notified of future announcements, please register at http://investor.tiffany.com (“E-Mail Alerts”).
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.
Forward-Looking Statements:
The historical trends and results reported in this document
should not be considered an indication of future performance.
Further, statements contained in this document that are not
statements of historical fact, including those that refer to plans,
assumptions and expectations for the current fiscal year and future
periods, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, the statements under
“Full Year 2016 Outlook” as well as statements that can be
identified by the use of words such as ‘expects,’ ‘projects,’
‘anticipates,’ ‘assumes,’ ‘forecasts,’ ‘plans,’ ‘believes,’
‘intends,’ ‘estimates,’ ‘pursues,’ ‘continues,’ ‘outlook,’ ‘may,’
‘will,’ ‘can,’ ‘should’ and variations of such words and similar
expressions. Examples of forward-looking statements include, but
are not limited to, statements we make regarding the Company’s
plans, assumptions, expectations, beliefs and objectives with
respect to store openings and closings; product introductions;
sales; sales growth; sales trends; store traffic; competitive
position; retail prices; gross margin; operating margin; expenses;
interest and other expenses, net; effective income tax rate; net
earnings and net earnings per share; share count; inventories;
capital expenditures; cash flow; liquidity; currency translation;
macroeconomic conditions; growth opportunities; litigation outcomes
and recovery related thereto; the collectability of amounts due
under financing arrangements with diamond mining and exploration
companies; contributions to Company pension plans; and certain
ongoing or planned real estate, product, marketing, retail,
customer experience, manufacturing, supply chain, information
systems development, upgrades and replacement, and other
operational and strategic initiatives.
These forward-looking statements are based upon the current
views and plans of management, speak only as of the date on which
they are made and are subject to a number of risks and
uncertainties, many of which are outside of our control. Actual
results could therefore differ materially from the planned, assumed
or expected results expressed in, or implied by, these
forward-looking statements. While we cannot predict all of the
factors that could form the basis of such differences, key factors
include, but are not limited to: global macroeconomic and
geopolitical developments; changes in interest and foreign currency
rates; changes in taxation policies and regulations; shifting
tourism trends; regional instability, violence (including terrorist
activities), election-related or other political activities or
events, and weather conditions that may affect local and tourist
consumer spending; changes in consumer confidence, preferences and
shopping patterns, as well as our ability to accurately predict and
timely respond to such changes; shifts in the Company’s product and
geographic sales mix; variations in the cost and availability of
diamonds, gemstones and precious metals; changes in our competitive
landscape; disruptions impacting the Company’s business and
operations; failure to successfully implement or make changes to
the Company’s information systems; gains or losses in the trading
value of the Company’s stock, which may impact the amount of stock
repurchased; and our ability to successfully control costs and
execute on, and achieve the expected benefits from, the operational
and strategic initiatives referenced above. Developments relating
to these and other factors may also warrant changes to the
Company’s operating and strategic plans, including with respect to
store openings, closings and renovations, capital expenditures,
information systems development, inventory management, and
continuing execution on, or timing of, the aforementioned
initiatives. Such changes could also cause actual results to differ
materially from the expected results expressed in, or implied by,
the forward-looking statements.
Additional information about potential risks and uncertainties
that could affect the Company’s business and financial results is
included under “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in the
Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2016 and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Company’s
most recent quarterly report on Form 10-Q. Readers of these
documents should consider the risks, uncertainties and factors
outlined above and in the Form 10-K in evaluating, and are
cautioned not to place undue reliance on, the forward-looking
statements contained herein. 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”). Internally,
management also monitors and measures its performance using certain
sales and earnings measures that include or exclude amounts, or are
subject to adjustments that have the effect of including or
excluding amounts, from the most directly comparable GAAP measure
(“non-GAAP financial measures”). The Company presents such non-GAAP
financial measures in reporting its financial results to provide
investors with useful supplemental information that will allow them
to evaluate the Company's operating results using the same measures
that management uses to monitor and measure its performance. 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. These non-GAAP financial measures presented here may not
be comparable to similarly-titled measures used by other
companies.
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”). Sales on a
constant-exchange-rate basis are calculated by taking the current
year's sales in local currencies and translating them into U.S.
dollars using the prior year's foreign exchange rates. Management
believes this constant-exchange-rate basis provides a useful
supplemental basis for the assessment of sales performance and of
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:
Two Months Ended December 31, 2016
Eleven Months Ended December 31, 2016
GAAPReported
TranslationEffect
Constant-Exchange-Rate Basis
GAAPReported
TranslationEffect
Constant-Exchange-Rate Basis
Net
Sales:
Worldwide — % (1 )% 1 % (3 )% — % (3 )% Americas (4 ) — (4 ) (6 )
(1 ) (5 ) Asia-Pacific 7 (2 ) 9 (1 ) (1 ) — Japan 16 8 8 12 12 —
Europe (10 ) (10 ) — (10 ) (6 ) (4 ) Other 33 — 33 — — —
Comparable Store
Sales:
Worldwide (2 )% (1 )% (1 )% (5 )% 1 % (6 )% Americas (4 ) (1 ) (3 )
(6 ) — (6 ) Asia-Pacific (4 ) (1 ) (3 ) (10 ) (2 ) (8 ) Japan 21 9
12 16 12 4 Europe (11 ) (7 ) (4 ) (14 ) (4 ) (10 ) Other (7 ) — (7
) (16 ) — (16 )
Net Earnings
Internally, management monitors and measures its earnings
performance excluding certain items listed below. Management
believes excluding such items provides a useful supplemental basis
for the assessment of the Company’s results relative to the
corresponding period in the prior year. The following tables
reconcile certain GAAP amounts to non-GAAP amounts:
(in millions, except per share amounts) GAAP
Impairmentcharges a
Specific cost-reductioninitiatives b
Non-GAAP
Year Ended January 31, 2016
Selling, general
& administrative expenses $ 1,731.2 $ (37.9 ) $ (8.8 ) $
1,684.5 As a % of net sales 42.2 %
41.0 % Earnings from
operations 760.1 37.9 8.8 806.8 As a % of net sales
18.5 % 19.7
% Provision for income taxes c 246.0
13.6 3.2 262.8
Net earnings 463.9 24.3
5.6 493.8 Diluted
earnings per share 3.59 0.19
0.05 3.83 a
Expenses associated with impairment charges related to a
financing arrangement with Koidu Limited. b 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. c The income tax effect has been
calculated as both current and deferred tax benefit (expense),
based upon the tax laws and statutory income tax rates applicable
in the tax jurisdiction(s) of the underlying item.
Free Cash Flow
Internally, management monitors its cash flow on a non-GAAP
basis. Free cash flow is calculated by deducting capital
expenditures from net cash provided by operating activities. The
ability to generate free cash flow demonstrates how much cash the
Company has available for discretionary and non-discretionary
purposes after deduction of capital expenditures. The Company's
operations require regular capital expenditures for the opening,
renovation and expansion of stores and distribution and
manufacturing facilities as well as ongoing investments in
information technology. Management believes this provides a useful
supplemental basis for assessing the Company’s operating cash
flows.
TIF-E
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version on businesswire.com: http://www.businesswire.com/news/home/20170117005492/en/
Tiffany & Co.Mark L. Aaron,
212-230-5301mark.aaron@tiffany.com
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