Tiffany &Co. said Tuesday that worldwide net sales increased 9% year-over-year to $895
million for the first quarter of 2013. On a constant-exchange-rate basis, which
excludes foreign currency fluctuations, worldwide net sales increased 13% and
comparable store sales rose 8%.
Sales growth was
seen in all regions for the international luxury retailer and would have been
even stronger if it was not for the unusually weak Japanese yen.
Net earnings
increased 3% to $84 million, or $0.65 per diluted share. Expenses of $9
million, or $0.05 per diluted share, were recorded in the quarter for recent
staff and occupancy reductions; excluding those costs, net earnings increased
10% to $89 million, or $0.70 per diluted share.
In addition, the
company maintained its fiscal 2013 forecast of net earnings in a range of
$3.43-$3.53 per diluted share. The New York-based company expects that worldwide
net sales will increase by a mid-single-digit percentage in U.S dollars and a
high-single-digit percentage increase on a constant-exchange-rate basis.
"First
quarter sales exceeded our expectations, enabling us to improve our sales
leverage on fixed expenses and achieve earnings growth, said Michael J.
Kowalski, Tiffany chairman and CEO. “In addition, we celebrated Tiffany's 175th
anniversary with our very successful Blue Book event and promotional activities
surrounding the debut of the film The Great Gatsby, for which we designed the
jewelry."
Kowalski added, "We
are maintaining our earnings forecast for the full year, mindful of continuing
soft sales results in the Americas and the negative translation effect of a
weaker yen…. Tiffany's global store base is growing this year with a planned
net addition of 14 stores, and we will be launching our redesigned website
later this year."
Net sales by
region are as follows:
* In
the Americas,
total sales rose 6% to $408 million. Comparable store sales rose 3% with
relatively stronger growth in the New York flagship store. Sales in New
York was aided from purchases by customers who attended the Blue Book
event.
* In the
Asia-Pacific region, total sales increased 15% to $223 million. On a
constant-exchange-rate basis, total sales increased 14%, due to sales growth in
Greater China and most other countries. Comparable store sales rose 9%.
* Sales in Japan
increased 2% to $145 million despite a negative translation effect from a
weakening yen. On a constant-exchange-rate basis, total sales increased 20% and
comparable store sales rose 21% due to particularly strong growth in Tiffany's
engagement and higher-end jewelry categories.
* In Europe, total
sales increased 6% to $93 million due to sales growth across continental
Europe. On a constant-exchange-rate basis, total sales and comparable store
sales rose 8% and 6% respectively.
*Other sales
tripled to $27 million from $9 million in the prior year, primarily reflecting
the conversion in July 2012 of five Tiffany stores in the United Arab Emirates
from independently-operated to company-operated.
In the first
quarter, Tiffany opened one store, in Xi'an, China and closed one in Taichung,
Taiwan. The Company currently operates approximately 275 stores (115 in the
Americas, 66 in Asia-Pacific, 55 in Japan, 34 in Europe and five in the
U.A.E.), compared with 251 stores (105 in the Americas, 59 in Asia-Pacific, 55
in Japan and 32 in Europe) a year ago.
Tiffany said it
plans to add 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 Japan and
Taiwan), as well as refurbishing a number of existing locations around the
world.
Gross margin
(gross profit as a percentage of net sales) was 56.2% versus last year's 57.3%.
The company said this was expected as it reflects a shift in sales mix toward
higher-priced, lower gross margin products.
Selling, general
and administrative expenses (SG&A) increased 8% in the quarter due to $9 million of expenses tied to cost
reduction initiatives related to staffing reductions, as well as subleasing of
office space at a loss, the company said. Excluding those costs, SG&A
expenses would have increased 6% due to new store-related costs and higher
marketing spending for the Blue Book event.
Net inventories
were $2.3 billion at April 30, 2013, or 4% higher than a year ago, the company
said. A 12% increase in finished goods inventories to support new store
openings and expanded product assortments was partly offset by a 5% decline in
combined raw material and work-in-process inventories. On a
constant-exchange-rate basis, net inventories were 7% higher than a year ago.
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