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Tiffany Reports Third Quarter Results

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Tiffany Reports Third Quarter Results
Tiffany & Co.
November 26, 2013 7:00 AM
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tiffany tiffany rings NEW YORK--(BUSINESS WIRE)--
tiffany silver
Tiffany & Co. ( TIF ) today reported a 50% increase in net earnings
in its third quarter ended October 31, 2013, largely resulting from 7%
growth in worldwide net sales and a higher operating margin. The strong
earnings growth in the quarter led management to increase its full year
forecast.

tiffany
Michael J. Kowalski, chairman and chief executive officer, said, “We are
very pleased with our overall results. Worldwide sales growth in the
quarter demonstrated the growing power of the TIFFANY & CO. brand and
the benefits of our expanding global presence. Operating earnings rose
faster than sales, reflecting favorable product cost trends and ongoing
well-controlled expenses. We’re experiencing excellent customer response
to our expanded fashion jewelry designs, highlighted by the ATLAS
collection, as well as continued growth in our fine and statement
jewelry, with particular strength in our yellow diamond collection.”

tiffany and co
In the three months (“third quarter”) ended
October 31, 2013:

Worldwide net sales increased 7% to $911 million. 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 11%, and comparable store sales
rose 7% due to growth in all regions.
Net earnings rose 50% to $95 million, or $0.73 per diluted share,
compared with $63 million, or $0.49 per diluted share, a year ago.
tiffany
In the nine months (“year-to-date”) ended October
31, 2013:

Worldwide net sales rose 7% to $2.7 billion. On a
constant-exchange-rate basis, worldwide net sales increased 11% and
comparable store sales rose 7% due to increases in all regions.
Net earnings increased 20% to $285 million, or $2.21 per diluted
share, versus $237 million, or $1.85 per diluted share, a year ago.
Expenses of $9 million, or $0.05 per diluted share, had been recorded
in this year’s first quarter for staff and occupancy reductions;
excluding those costs, net earnings in the year-to-date increased 23%
to $291 million, or $2.26 per diluted share (see “Non-GAAP Measures”).

Net sales highlights were as follows:

Total sales in the Americas region increased 4% to $417 million in the
third quarter and 4% to $1.3 billion in the year-to-date. On a
constant-exchange-rate basis, total sales increased 5% in the quarter
and 4% in the year-to-date, and comparable store sales rose 1% in both
the quarter and year-to-date due to growth in Tiffany’s New York
flagship store sales.
In the Asia-Pacific region, total sales increased 27% to $238 million
in the third quarter and 20% to $670 million in the year-to-date. On a
constant-exchange-rate basis, total sales increased 29% and 21% in the
respective periods, and comparable store sales rose 22% and 15% due to
strong sales growth throughout the region.
Tiffany’s business in Japan continued to perform well in the third
quarter. A negative translation effect from a substantially weaker yen
versus the U.S. dollar caused total sales to decline 13% to $128
million in the third quarter and 8% to $409 million in the
year-to-date. However, on a constant-exchange-rate basis, total sales
rose 9% in the quarter and 12% in the year-to-date, primarily due to
comparable store sales growth of 5% and 11%.
In Europe, total sales increased 7% to $104 million in the third
quarter and 8% to $309 million in the year-to-date. On a
constant-exchange-rate basis, total sales increased 4% in the quarter
and 7% in the year-to-date, with comparable store sales growth of 2%
and 5%, led by sales growth in the United Kingdom.
Other sales increased 14% to $24 million in the third quarter and 56%
to $76 million in the year-to-date. On a constant-exchange-rate basis,
total sales also rose 14% in the quarter and 56% in the year-to-date;
comparable store sales of five TIFFANY & CO. stores in the United Arab
Emirates, which were converted from independently-operated to
Company-operated in July 2012, increased 1% in the third quarter.
Tiffany opened six stores in the quarter: in Paramus, New Jersey,
Cleveland, Ohio, West Edmonton, Canada and Curitiba, Brazil; in
Stuttgart, Germany; and in Jinan, China. At October 31, 2013, Tiffany
operated 283 stores (120 in the Americas, 68 in Asia-Pacific, 54 in
Japan, 36 in Europe and five in the U.A.E.), versus 272 stores (113 in
the Americas, 64 in Asia-Pacific, 56 in Japan, 34 in Europe and five
in the U.A.E.) a year ago.

Other financial highlights:

Gross margin (gross profit as a percentage of net sales) in the third
quarter increased 2.6 points to 57.0%, from 54.4% a year ago, and in
the year-to-date rose 0.9 point to 56.9% compared with 56.0% in the
prior-year period. This contrasts with gross margin declines of 3.5
points and 2.4 points in the third quarter and year-to-date of 2012.
In this third quarter and year-to-date, gross margin has benefited
largely from reduced product cost pressures, as well as price
increases taken earlier in the year. A shifting sales mix toward
higher-priced, lower gross margin products has continued to offset a
portion of these benefits.
SG&A (selling, general and administrative) expenses increased 5% in
the third quarter largely due to incremental labor and store-related
costs, and rose 6% in the year-to-date. The translation effect from a
stronger U.S. dollar reduced SG&A expense growth by 3% in both
periods. In addition, $9 million of expenses had been recorded in the
first quarter tied to specific cost reduction initiatives related to
staffing reductions, as well as subleasing of office space (see
“Non-GAAP Measures”).
Interest and other expenses, net were $14 million in the third quarter
and $41 million in the year-to-date, compared with $15 million and $40
million in the respective prior-year periods.
The effective income tax rate of 32.3% in the third quarter benefited
from a one-time favorable impact of tax regulations as well as
differences in the geographical mix of earnings. In the prior year’s
third quarter, the rate of 38.4% was affected by the Company’s true-up
of the prior year’s tax provision upon filing its tax returns. The
effective income tax rate was 33.8% in the year-to-date versus 35.6%
in the prior year.
Cash and cash equivalents were $521 million at October 31, 2013,
compared with $345 million a year ago. Total short-term and long-term
debt as a percentage of stockholders' equity was 36% at October 31,
2013, versus 40% a year ago.
Net inventories were $2.4 billion at October 31, 2013, or 6% higher
than a year ago. There was similar growth in finished goods
inventories and combined raw material and work-in-process inventories,
which support new stores, expanded product assortments, rough diamond
sourcing and internal manufacturing requirements. On a
constant-exchange-rate basis, net inventories were 9% above last year.

Outlook for 2013:

For the fiscal year ending January 31, 2014, management is forecasting
net earnings in a range of $3.65-$3.75 per diluted share, compared with
$3.50-$3.60 per diluted share in its previous outlook and $3.25 per
diluted share in 2012. This forecast excludes $0.05 per diluted share of
expenses tied to specific cost-reduction initiatives that were recorded
in the first quarter. This forecast is based on the following
assumptions, which are approximate and may or may not prove valid:

a) Worldwide net sales increasing by a mid-single-digit percentage in
U.S. dollars (a high-single-digit percentage increase on a
constant-exchange-rate basis).

b) Adding a net of 14 Company-operated stores (opening six in the
Americas, seven in Asia-Pacific and three in Europe, and closing one
each in Asia-Pacific and Japan).

c) Operating earnings increasing at a higher rate than sales growth, due
to improvements in both the gross margin and the SG&A expense ratio.

d) Interest and other expenses, net of $58 million.

e) The effective income tax rate in a range of 34% - 35%.

f) Net inventories increasing 5%; capital expenditures of $225 million
(versus $220 million in 2012); and free cash flow (cash flow from
operating activities less capital expenditures) of $300 million (versus
$109 million in 2012).


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”).


Next Scheduled Announcement:


The Company expects to report its November-December holiday sales
results on Friday January 10, 2014. To receive notifications of future
announcements, 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 in the
Americas, Asia-Pacific, Japan, Europe and the United Arab Emirates, and
also engages in direct selling through Internet, catalog and business
gift operations. For more information, visit www.tiffany.com
or call the 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,
products, store openings and closings, operating margin, interest and
other expenses, the effective income tax rate, net earnings,
inventories, growth opportunities, capital expenditures and free cash
flow. 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 Form 10-K, 10-Q and 8-K 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(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 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 sales percentage increases
(decreases) from the GAAP to the non-GAAP basis versus the previous year:

 
 
 
Third Quarter 2013 vs. 2012
 
 
 
Year-to-date 2013 vs. 2012
 
 
 
 
 
 
Constant-
 
 
 
 
 
 
 
 
 
Constant-
GAAP
Translation
Exchange-Rate
GAAP
Translation
Exchange-Rate
Reported
 
 
 
Effect
 
 
 
Basis
 
 
 
Reported
 
 
 
Effect
 
 
 
Basis
Net Sales:

Worldwide
7 %
(4)%
11 %
7 %
(4)%
11 %
Americas
4 %
(1)%
5 %
4 %


4 %
Asia-Pacific
27 %
(2)%
29 %
20 %
(1)%
21 %
Japan
(13)%
(22)%
9 %
(8)%
(20)%
12 %
Europe
7 %
3 %
4 %
8 %
1 %
7 %
Other
14 %


14 %
56 %


56 %
Comparable Store Sales:

Worldwide
3 %
(4)%
7 %
3 %
(4)%
7 %
Americas
1 %


1 %
1 %


1 %
Asia-Pacific
20 %
(2)%
22 %
14 %
(1)%
15 %
Japan
(16)%
(21)%
5 %
(9)%
(20)%
11 %
Europe
4 %
2 %
2 %
6 %
1 %
5 %
Other *
1%


1 %
1%


1 %
 
* Represents sales in five TIFFANY & CO. stores in the United Arab
Emirates, which were converted from independently-operated to
Company-operated in July 2012, and became comparable in the third
quarter of 2013.
 

Net Earnings


The accompanying press release presents net earnings and highlights
expenses tied to specific cost reduction initiatives 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 October 31, 2013.
The following table reconciles GAAP net earnings and net earnings per
diluted share (“EPS”) to non-GAAP net earnings and net earnings per
diluted share, as adjusted:

 
 
 
 
 
 
 
Nine Months Ended
October 31, 2013

( in thousands, except per share amounts )
 
 
 
 
 
 
 
$
(after tax)

 
 
 
 
 
Diluted
EPS

Net earnings, as reported
$
 
 
 
284,968
 
 
 
 
 
$
 
 
 
2.21
Cost reduction initiatives a
 
 
 
 
5,785
 
 
 
 
 
 
 
 
 
0.05
Net earnings, as adjusted
$
 
 
 
290,753
 
 
 
 
 
$
 
 
 
2.26
a
 
On a pre-tax basis, includes charges of $9,379,000 within SG&A for
the nine months ended October 31, 2013 associated with 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
 
 
 
Three Months Ended October 31,

Nine Months Ended October 31,
2013
2012
2013
2012
Net sales
$
911,478
$
852,741
$
2,732,846
$
2,558,480
 
Cost of sales
391,997
388,452
1,178,012
1,126,011
 
Gross profit
519,481
464,289
1,554,834
1,432,469
 
Selling, general and administrative expenses
365,863
346,994
1,083,172
1,025,609
 
Earnings from operations
153,618
117,295
471,662
406,860
 
Interest and other expenses, net
13,922
14,783
41,328
39,587
 
Earnings from operations before income taxes
139,696
102,512
430,334
367,273
 
Provision for income taxes
45,086
39,333
145,366
130,759
 
Net earnings
$
94,610
$
63,179
$
284,968
$
236,514
 
 
Net earnings per share:
 
Basic
$
0.74
$
0.50
$
2.23
$
1.87
Diluted
$
0.73
$
0.49
$
2.21
$
1.85
 
 
Weighted-average number of common shares:
 
Basic
128,004
126,737
127,716
126,697
Diluted
128,974
127,902
128,729
127,914
 
 
 
 
 
 
 
 
 
 
TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
 
 
 
October 31,
January 31,
October 31,
 
2013
 
2013
 
2012
ASSETS

 
Current assets:
Cash and cash equivalents
$
521,200
$
504,838
$
344,512
Accounts receivable, net
165,862
173,998
160,604
Inventories, net
2,418,710
2,234,334
2,289,571
Deferred income taxes
78,020
79,508
106,744
Prepaid expenses and other current assets
178,710
158,911
181,375
 
Total current assets
3,362,502
3,151,589
3,082,806
 
Property, plant and equipment, net
836,062
818,838
800,225
Other assets, net
680,937
660,423
566,964
 
$
4,879,501
$
4,630,850
$
4,449,995
 
LIABILITIES AND STOCKHOLDERS' EQUITY

 
Current liabilities:
Short-term borrowings
$
252,016
$
194,034
$
196,279
Accounts payable and accrued liabilities
309,798
295,424
284,189
Income taxes payable
16,190
30,487
17,958
Merchandise and other customer credits
66,110
66,647
65,996
 
Total current liabilities
644,114
586,592
564,422
 
Long-term debt
755,724
765,238
781,637
Pension/postretirement benefit obligations
348,561
361,246
322,033
Other long-term liabilities
223,684
209,732
205,720
Deferred gains on sale-leasebacks
85,464
96,724
108,962
Stockholders' equity
2,821,954
2,611,318
2,467,221
 
$
4,879,501
$
4,630,850
$
4,449,995
 

Finance Investment & Company Information
Contact:
Tiffany & Co. Mark L. Aaron, 212-230-5301 mark.aaron@tiffany.com
tiffany co jewelry
tiffany online
tiffany blog tiffany About replicatiffanystores.com blog
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