Tiffany & Co. (NYSE:TIF) today reported its results for the
three month period (“first quarter”) ended April 30, 2015. Net
sales and earnings declines, albeit smaller than anticipated,
reflected the negative effects from the strong U.S. dollar and a
difficult year-over-year sales comparison in Japan. Management
maintained its earnings guidance for the year ending January 31,
2016, as specified in the Company’s news release on March 20th.
In the first quarter:
- Worldwide net sales of $962 million
were 5% below the prior year. However, on a constant-exchange-rate
basis excluding the effect of translating
foreign-currency-denominated sales into U.S. dollars (see “Non-GAAP
Measures” schedule), worldwide net sales rose 1% due to growth in
all regions except Japan and driven by increased sales of fashion
gold jewelry and statement jewelry; worldwide comparable store
sales on that basis were 1% below last year.
- Net earnings declined 17% to $105
million, or $0.81 per diluted share, compared with $126 million, or
$0.97 per diluted share, a year ago, due to the lower sales as well
as higher SG&A (selling, general and administrative) expenses
primarily related to marketing spending.
Frederic Cumenal, chief executive officer, said, “We started the
year facing well-known challenges from both global economic
uncertainties and the effect of a strong U.S. dollar on the
translation of foreign-denominated sales into dollars and on
foreign tourist spending in the U.S., as well as a difficult sales
comparison in Japan. Despite those factors, our first quarter
results for net sales, as well as for gross margin and net
earnings, were somewhat better than we anticipated. First quarter
highlights also included the continuing success of the stylish
TIFFANY T jewelry collection, as well as the launch of our
extraordinary CT60™ watch collection.”
Net sales highlights by region were as
follows:
- In the Americas, on a
constant-exchange-rate basis total sales rose 3% and comparable
store sales were 1% above the prior year. This reflected higher
sales to U.S. customers offset by lower foreign tourist spending in
the U.S. which management attributes to the strong U.S. dollar, as
well as healthy sales growth in Canada and Latin America. As
reported in U.S. dollars, total sales rose 1% to $444 million.
- In the Asia-Pacific region, sales on a
constant-exchange-rate basis increased 4% in total and 2% on a
comparable store basis. There was noteworthy sales growth in China,
Australia and Singapore, but meaningful sales declines in Hong Kong
and Macau. As reported in U.S. dollars, total sales declined 1% to
$259 million.
- In Japan, on a constant-exchange-rate
basis total sales declined 18% and comparable store sales declined
24%. However, the declines reflected difficult comparisons to
strong growth in last year’s first quarter when comparable store
sales had surged 30% due to consumer demand prior to an increase in
Japan’s consumption tax on April 1, 2014. As reported in U.S.
dollars, total sales in Japan declined 30% to $122 million.
- In Europe, on a constant-exchange-rate
basis total sales increased 21% and comparable store sales
increased 17% due to growth across continental Europe reflecting
robust spending by foreign tourists as well as higher sales to
local customers. As reported in U.S. dollars, total sales in Europe
increased 2% to $103 million.
- Other sales on a constant-exchange-rate
basis rose 1% and comparable store sales on that same basis were
unchanged from the prior year. As reported in U.S. dollars, Other
sales declined 6% to $35 million.
- Tiffany opened three Company-operated
stores in the first quarter: two in China in Shanghai and Hangzhou
and one in the U.S. in Miami. At April 30, 2015, the Company
operated 298 stores (123 in the Americas, 75 in Asia-Pacific, 56 in
Japan, 38 in Europe, and included in Other sales are five in the
United Arab Emirates and one in Russia), versus 292 stores a year
ago (121 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) increased to 59.1% from 58.2% in last
year’s first quarter. The change reflected benefits from favorable
product input costs and price increases, as well as the absence of
a one-time charge in the first quarter of 2014 for the closing of a
diamond polishing facility. These benefits were somewhat mitigated
by a negative effect from geographical sales mix.
- SG&A expenses increased 5%, largely
due to higher marketing expenses as well as incremental expenses
related to the Company’s U.S. pension and postretirement plans. The
rate of overall SG&A expense growth was halved by the
translation effect of the strong U.S. dollar.
- Interest and other expenses, net
declined to $9 million from $16 million in last year’s first
quarter. The decline was partly due to 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. To a
lesser extent, interest and other expenses, net declined due to
changes in foreign currency transaction gains/losses.
- The effective tax rate was 34.7%,
compared with 35.1% in last year’s first quarter.
- Cash and cash equivalents and
short-term investments were $715 million at April 30, 2015,
compared with $381 million a year ago. Total short-term and
long-term debt as a percentage of stockholders’ equity was 37% and
35% at April 30, 2015 and 2014, respectively.
- Net inventories of approximately $2.4
billion at April 30, 2015 were 2% lower than the prior year, but
increased 2% excluding the translation effect of the strong U.S.
dollar in support of new stores and product introductions.
- Capital expenditures were $37 million,
versus $35 million in last year’s first quarter.
- The Company spent $33 million in the
first quarter to repurchase approximately 380,000 shares of its
common stock at an average cost of $87.16 per share. At April 30th,
approximately $240 million remained authorized for repurchases
under a $300 million, three-year program that expires in March
2017.
Mr. Cumenal added, “Our plans this year include expanding
existing jewelry collections with new designs and opening stores in
a number of important markets, all intended to further enhance
Tiffany’s position as a leading global luxury brand. Despite these
plans and the better-than-expected first quarter results, our
forecast for minimal earnings growth for the full year continues to
reflect caution regarding our expectations for fiscal 2015 in light
of the strong dollar and other global economic uncertainties.
However, we believe we can return to a healthier rate of
double-digit EPS growth over the long-term.”
Outlook for 2015:
For the fiscal year ending January 31, 2016, management
continues to forecast minimal growth in net earnings per diluted
share from the $4.20 (excluding charges) earned in fiscal 2014.
This forecast anticipates net earnings in the second quarter
declining at a more moderate rate than in the first quarter,
followed by expected double-digit percentage net earnings growth in
the second half of the year. This forecast reflects no material
changes from the previously-disclosed (on March 20, 2015)
assumptions for sales growth, store openings, earnings from
operations, interest and other expenses, net, the effective tax
rate, net inventories, capital expenditures and free cash flow, all
of which 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 second quarter results on
August 27, 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:
First Quarter 2015 vs. 2014 GAAP
Reported
Translation
Effect
Constant-
Exchange-
Rate Basis
Net
Sales:
Worldwide (5 )% (6 )% 1 % Americas 1 % (2 )% 3 % Asia-Pacific (1 )%
(5 )% 4 % Japan (30 )% (12 )% (18 )% Europe 2 % (19 )% 21 % Other
(6 )% (7 )% 1 %
Comparable Store
Sales:
Worldwide (7 )% (6 )% (1 )% Americas (1 )% (2 )% 1 % Asia-Pacific
(2 )% (4 )% 2 % Japan (35 )% (11 )% (24 )% Europe (2 )% (19 )% 17 %
Other (8 )% (8 )% — %
TIFFANY &
CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
(Unaudited, in millions, except per share
amounts)
Three Months Ended April 30,
2015 2014 Net
sales
$ 962.4 $ 1,012.1 Cost of sales
393.4 422.6 Gross profit
569.0 589.5
Selling, general and administrative expenses
399.0 379.7
Earnings from operations
170.0 209.8 Interest
and other expenses, net
9.3 16.3 Earnings from
operations before income taxes
160.7 193.5 Provision
for income taxes
55.8 67.9 Net earnings
$
104.9 $ 125.6 Net earnings per share: Basic
$ 0.81 $ 0.97 Diluted
$ 0.81 $ 0.97
Weighted-average number of common shares: Basic
129.2 128.9 Diluted
129.8 129.8
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)
April 30, 2015 January 31,2015 April 30,2014
ASSETS
Current assets: Cash and cash equivalents and short-term
investments
$ 715.4 $ 731.5 $ 381.2 Accounts
receivable, net
192.5 195.2 194.6 Inventories, net
2,363.0 2,362.1 2,418.4 Deferred income taxes
101.5
102.6 102.3 Prepaid expenses and other current assets
207.6
220.0 236.8 Total current assets
3,580.0 3,611.4 3,333.3 Property, plant and
equipment, net
897.0 899.5 848.4 Other assets, net
673.0 669.7 643.8
$
5,150.0 $ 5,180.6 $ 4,825.5
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities: Short-term borrowings
$
197.1 $ 234.0 $ 241.0 Accounts payable and accrued
liabilities
271.4 318.0 306.1 Income taxes payable
44.6 39.9 26.1 Merchandise and other customer credits
72.2 66.1 67.5 Total current
liabilities
585.3 658.0 640.7 Long-term debt
882.1 882.5 750.8 Pension/postretirement benefit obligations
532.2 524.2 273.7 Other long-term liabilities
201.3
200.7 219.5 Deferred gains on sale-leasebacks
62.8 64.5 80.2
Stockholders’ equity
2,886.3 2,850.7 2,860.6
$ 5,150.0 $ 5,180.6 $ 4,825.5
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150527005370/en/
Tiffany & Co.Mark L. Aaron,
212-230-5301mark.aaron@tiffany.com
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