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Tiffany's worldwide sales up 11% in Q2
29 Aug '08
6 min read
• The Company operated 196 TIFFANY & CO. stores and boutiques at July 31, 2008 (82 in the Americas, 95 in the Asia-Pacific region and 19 in Europe) compared with 172 stores (74 in the Americas, 83 in Asia-Pacific and 15 in Europe) a year ago.
• Other sales increased 37% to $24.7 million in the second quarter and 10% to $37.2 million in the first half, largely due to increased wholesale sales of diamonds in connection with the Company's diamond sourcing program.
Michael J. Kowalski, chairman and chief executive officer, said, "Tiffany's global retail operations once again demonstrated the ability to generate strong operating earnings growth despite weakness incertain individual country markets. Our continued expansion throughout Asia and Europe should contribute to increasingly consistent and resilient long-term earnings growth."
Other financial highlights were as follows:
• Gross margin (gross profit as a percentage of net sales) increased in the second quarter and first half to 57.8% and 57.4%, respectively, from 56.1% in both prior-year periods. The increases largely reflected favorable changes in geographic and product sales mix, as well as sales leverage on fixed costs.
• Selling, general and administrative (SG&A) expenses rose 13% in both the second quarter and first half due to incremental costs related to new stores and increased marketing expenses, as well as some translation effect from foreign currencies. SG&A expenses as a percentage of net sales were 39.8% in the second quarter and 40.7% in the first half, compared with 39.1% and 40.1% in the respective prior-year periods.
• The effective tax rate was 37.0% in the second quarter and 36.9% in the first half, versus 39.4% and 38.1% in the prior year.
• Net inventories at July 31, 2008 increased 10% from a year ago to $1.51 billion, largely due to increased raw material and work-in-process inventories for manufacturing operations, inventories for new store openings and currency translation.
• The Company repurchased and retired 1,723,201 shares of its Common Stock in the second quarter at a total cost of $73.7 million, or an average cost of $42.75 per share. In the first half, the Company repurchased and retired 3,105,801 shares of its Common Stock at a total cost of $128.5 million, or an average cost of $41.37 per share. Under the current program, as of July 31st there remained $492 million available for future repurchases through January 2011.
• Total debt as percentage of stockholders' equity was 36% at July 31, compared with 27% a year ago.
Mr. Kowalski added, "Tiffany's increased sales and earnings so far this year are notable in view of the substantial growth achieved in the first half of last year, which had included an 18% sales increase and a 29% increase in net earnings from continuing operations. While we acknowledge that challenging economic and consumer conditions exist in the U.S., as they have for several quarters, our first half results and the most recent worldwide trends keep us on track to meet our full year sales and earnings growth expectations."
2008 Outlook:
The Company expects net earnings in the full year to increase to $2.82 - $2.92 per diluted share, versus its previous forecast of $2.80 - $2.90. This expectation includes worldwide sales growth of approximately 9%, based on continued strong growth in Europe and Asia-Pacific (other than Japan) and a return to growth in comparable U.S. store sales in the fourth quarter due to an easier year-over-year comparison. The Company now also expects the full-year operating margin to increase slightly over the prior year.
• Other sales increased 37% to $24.7 million in the second quarter and 10% to $37.2 million in the first half, largely due to increased wholesale sales of diamonds in connection with the Company's diamond sourcing program.
Michael J. Kowalski, chairman and chief executive officer, said, "Tiffany's global retail operations once again demonstrated the ability to generate strong operating earnings growth despite weakness incertain individual country markets. Our continued expansion throughout Asia and Europe should contribute to increasingly consistent and resilient long-term earnings growth."
Other financial highlights were as follows:
• Gross margin (gross profit as a percentage of net sales) increased in the second quarter and first half to 57.8% and 57.4%, respectively, from 56.1% in both prior-year periods. The increases largely reflected favorable changes in geographic and product sales mix, as well as sales leverage on fixed costs.
• Selling, general and administrative (SG&A) expenses rose 13% in both the second quarter and first half due to incremental costs related to new stores and increased marketing expenses, as well as some translation effect from foreign currencies. SG&A expenses as a percentage of net sales were 39.8% in the second quarter and 40.7% in the first half, compared with 39.1% and 40.1% in the respective prior-year periods.
• The effective tax rate was 37.0% in the second quarter and 36.9% in the first half, versus 39.4% and 38.1% in the prior year.
• Net inventories at July 31, 2008 increased 10% from a year ago to $1.51 billion, largely due to increased raw material and work-in-process inventories for manufacturing operations, inventories for new store openings and currency translation.
• The Company repurchased and retired 1,723,201 shares of its Common Stock in the second quarter at a total cost of $73.7 million, or an average cost of $42.75 per share. In the first half, the Company repurchased and retired 3,105,801 shares of its Common Stock at a total cost of $128.5 million, or an average cost of $41.37 per share. Under the current program, as of July 31st there remained $492 million available for future repurchases through January 2011.
• Total debt as percentage of stockholders' equity was 36% at July 31, compared with 27% a year ago.
Mr. Kowalski added, "Tiffany's increased sales and earnings so far this year are notable in view of the substantial growth achieved in the first half of last year, which had included an 18% sales increase and a 29% increase in net earnings from continuing operations. While we acknowledge that challenging economic and consumer conditions exist in the U.S., as they have for several quarters, our first half results and the most recent worldwide trends keep us on track to meet our full year sales and earnings growth expectations."
2008 Outlook:
The Company expects net earnings in the full year to increase to $2.82 - $2.92 per diluted share, versus its previous forecast of $2.80 - $2.90. This expectation includes worldwide sales growth of approximately 9%, based on continued strong growth in Europe and Asia-Pacific (other than Japan) and a return to growth in comparable U.S. store sales in the fourth quarter due to an easier year-over-year comparison. The Company now also expects the full-year operating margin to increase slightly over the prior year.
Tiffany & Co.
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