Tiffany & Co. (NYSE: TIF) today reported its financial
results for the three months (“first quarter”) ended April 30,
2019. Worldwide net sales as reported were modestly below the prior
year, and were equal to the prior year on a constant-exchange-rate
basis that excludes the effect of translating
foreign-currency-denominated sales into U.S. dollars (see “Non-GAAP
Measures”). Net earnings also reflected a lower operating margin,
as well as the benefit from a lower-than-anticipated effective
income tax rate.
Alessandro Bogliolo, Chief Executive Officer, said, “Our first
quarter results reflect significant foreign exchange headwinds and
dramatically lower worldwide spending attributed to foreign
tourists. That said, we were pleased that, at the core of our
business, global sales attributed to local customers, led by sales
in China, grew over last year’s very strong sales results. We
believe this growth in sales to local customers reflects progress
in executing our strategic priorities, including innovations across
products, communications and the customer experience, and that
Tiffany is positioned for improving trends in the second half of
2019.”
In the first quarter:
- Worldwide net sales declined 3% to $1.0
billion and comparable sales declined 5%; on a
constant-exchange-rate basis, net sales were equal to the prior
year and comparable sales declined 2%. These results reflected
mixed performance across regions and product categories.
- Net earnings of $125 million were 12%
lower than the prior year’s $142 million, and net earnings per
diluted share were $1.03 versus $1.14 in the prior year.
Net sales by region in the first quarter
were as follows:
- In the Americas, total net sales
declined 4% to $406 million, and comparable sales declined 5%; on a
constant-exchange-rate basis, both total net sales and comparable
sales declined 4%. Management attributed these sales declines
largely to lower spending by foreign tourists, which represented a
continuing negative trend from the second half of last year.
- In Asia-Pacific, total net sales
declined 1% to $324 million and comparable sales declined 5% due to
the effect of foreign currency translation; on a
constant-exchange-rate basis, total sales rose 3% and comparable
sales were equal to the prior year. These results reflected a
continuation of strong growth in mainland China and mixed results
in other markets. These sales results also reflected lower spending
attributed to foreign tourists.
- In Japan, total net sales declined 4%
to $145 million and comparable sales declined 4%; on a
constant-exchange-rate basis, total sales and comparable sales were
equal to the prior year. These sales results were affected by lower
spending attributed to foreign tourists.
- In Europe, total net sales declined 4%
to $102 million and comparable sales declined 7%; on a
constant-exchange-rate basis, total sales and comparable sales rose
4% and 1%, respectively. These results reflected mixed geographical
performance across the region.
- Other net sales of $26 million were 17%
above the prior year, as increased wholesale sales of diamonds more
than offset a 17% decline in comparable sales in our stores in the
UAE.
- Tiffany opened two Company-operated
stores in the first quarter, closed two stores and relocated two
stores. At April 30, 2019, the Company operated 321 stores (124 in
the Americas, 89 in Asia-Pacific, 56 in Japan, 47 in Europe and
five in the UAE), versus 314 stores a year ago (123 in the
Americas, 87 in Asia-Pacific, 54 in Japan, 46 in Europe and four in
the UAE).
- Sales results by jewelry category in
the first quarter were as follows: Jewelry Collections rose 1%,
Engagement Jewelry declined 6% and Designer Jewelry declined 14%;
on a constant-exchange-rate basis, those categories increased 4%,
declined 2% and declined 11%, respectively.
Other highlights in the first
quarter:
- Gross margin (gross profit as a
percentage of net sales) of 61.7% was below the prior year’s 63.0%
. The lower margin largely reflected sales deleverage on fixed
costs, changes in sales mix toward higher price point jewelry, and
an increase in wholesale sales of diamonds, partly offset by lower
product related costs.
- Selling, general and administrative
(“SG&A”) expenses increased 3% largely due to higher store
occupancy and depreciation expenses. Changes in foreign currency
exchange rates had the effect of decreasing SG&A expenses by
2%.
- The effective income tax rate of 17.3%
was below the prior year’s rate of 25.3%. The rate in the first
quarter of 2019 included the recognition of an income tax benefit
of $7.5 million, or $0.06 per diluted share, related to an increase
in the estimated 2018 Foreign Derived Intangible Income (“FDII”)
benefit as a result of U.S. Treasury guidance issued during the
first quarter of 2019.
- The Company repurchased approximately
271,000 shares of its Common Stock in the first quarter at a total
cost of $25.4 million and an average cost of approximately $94 per
share. The Company has approximately $610 million of authorization
remaining to repurchase shares under a program that was approved by
the Company’s Board of Directors in May 2018 for up to $1.0 billion
of repurchases and which expires in January 2022.
- Net inventories at April 30, 2019 were
6% above the prior year due to a higher level of finished goods
inventories, reflecting recent sales performance and strategic
investments in High Jewelry.
- At April 30, 2019, cash and cash
equivalents and short-term investments totaled $763 million. Total
debt (short-term borrowings and long-term debt) of $1.0 billion
represented 32% of stockholders’ equity, versus 30% a year
ago.
Fiscal 2019 Outlook:
Management’s guidance for fiscal 2019 includes: (i) worldwide
net sales increasing by a low-single-digit percentage over the
prior year; (ii) net earnings per diluted share increasing by a
low-to-mid-single-digit percentage; and (iii) a continued
expectation for a decline in net earnings per diluted share in the
second quarter of the year, largely reflecting continuing sales
pressures from the effect of lower foreign tourist spending,
difficult comparisons to strong growth in last year’s second
quarter and sales deleverage on fixed costs. These expectations are
approximations and are based on the Company’s plans and assumptions
for the full year, including, to varying degrees: (i) a
low-single-digit increase in comparable sales, with varying results
across the regions; (ii) worldwide gross retail square footage
increasing 3%, net through eight store openings, six closings and
15 relocations; (iii) tariffs increasing on jewelry that the
Company exports from the U.S. to China from its current levels to a
new level of 25% on average; (iv) operating margin equal to or
slightly above the prior year; (v) interest and other expenses, net
lower than the prior year; (vi) an effective income tax rate in the
low-20’s%; (vii) a stronger U.S. dollar on a year-over-year basis;
and (viii) a modest effect on EPS from share repurchases.
Management also expects: (i) net cash provided by operating
activities of at least $750 million and (ii) free cash flow (see
“Non-GAAP Measures”) of at least $400 million. These expectations
are approximations and are based on the Company’s plans and
assumptions for the full year, including: (i) minimal growth in net
inventories for the full year, (ii) capital expenditures of $350
million and (iii) net earnings in line with management’s
expectations, as described above.
Dividend Announcement
The Tiffany & Co. Board of Directors has declared a regular
quarterly dividend of $0.58 per share of Common Stock, representing
a 5% increase in the quarterly rate. This declaration increases the
quarterly dividend from $0.55 per share (or $2.20 annually) to the
new rate of $0.58 per share (or $2.32 annually). The dividend will
be paid on July 10, 2019 to shareholders of record on June 20,
2019. Future dividends are subject to declaration by the
directors.
Mr. Bogliolo said, “Tiffany has the financial strength to invest
in growing its business while also returning capital to
shareholders. We are pleased to announce this 18th dividend
increase in the past 17 years.”
Today’s Conference Call:
The Company will conduct a conference call today at 8:30 a.m.
(EDT) to review actual results and the outlook. Please visit
https://investor.tiffany.com (and click on “News &
Events/Events & Presentations”).
Next Scheduled Announcement:
The Company expects to report financial results for its second
quarter ending July 31st on August 28, 2019 by issuing a news
release and hosting an accompanying conference call. To receive
email alerts of future announcements, please register at
https://investor.tiffany.com (and click on “Contact Us/Email
Alerts).
About Tiffany & Co.:
In 1837, Charles Lewis Tiffany founded his company in New York
City where his store was soon acclaimed as the palace of jewels for
its exceptional gemstones. Since then, TIFFANY & CO. has become
synonymous with elegance, innovative design, fine craftsmanship and
creative excellence. During the 20th century fame thrived worldwide
with store network expansion and continuous cultural relevance, as
exemplified by Truman Capote’s Breakfast at Tiffany’s and the film
starring Audrey Hepburn.
Today, with more than 14,000 employees, TIFFANY & CO. and
its subsidiaries design, manufacture and market jewelry, watches
and luxury accessories – including more than 5,000 skilled artisans
who cut diamonds and craft jewelry in the Company’s workshops,
realizing its commitment to superlative quality. The Company
operates more than 300 TIFFANY & CO. retail stores worldwide as
part of its omnichannel approach. To learn more about TIFFANY &
CO. as well as its commitment to sustainability, please visit
tiffany.com.
Forward-Looking Statements:
The historical trends and results reported in this document and
on our first quarter earnings conference call should not be
considered an indication of future performance. Further, statements
contained in this document and made on such call 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
“Fiscal 2019 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,’ ‘indicates,’ ‘pursues,’ ‘scheduled,’ ‘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; store
productivity; the renovation of the Company’s New York City
flagship store, including the timing and cost thereof, and the
temporary expansion of its retail operations to 6 East 57th Street;
product introductions; sales; sales growth; sales trends; store
traffic; the Company’s strategy and initiatives and the pace of
execution thereon; the amount and timing of investment spending;
the Company’s objectives to compete in the global luxury market and
to improve financial performance; retail prices; gross margin;
operating margin; expenses; interest and other expenses, net;
effective income tax rate; the nature, amount or scope of charges
resulting from recent revisions to the U.S. tax code; net
earnings and net earnings per share; share count; inventories;
capital expenditures; cash flow; liquidity; currency translation;
macroeconomic and geopolitical conditions; the imposition of
increased tariffs on jewelry that the Company exports from the U.S.
to China; growth opportunities; litigation outcomes and recovery
related thereto; amounts recovered under Company insurance
policies; 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 initiatives and strategic priorities.
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 (including
changes effected by the recent revisions to the U.S. tax
code) or changes in the guidance related to, or interpretation of,
such policies and regulations; shifting tourism trends; regional
instability; violence (including terrorist activities); political
activities or events (including the potential for rapid and
unexpected changes in government, economic and political policies,
the imposition of additional duties, tariffs, taxes and other
charges or other barriers to trade, including as a result of
changes in diplomatic and trade relations or agreements with other
countries); 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; adverse publicity
regarding the Company and its products, the Company’s third-party
vendors or the diamond or jewelry industry more generally; any
non-compliance by third-party vendors or suppliers with the
Company’s sourcing and quality standards, codes of conduct, or
contractual requirements as well as applicable laws and
regulations; 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 through
open market transactions, including through Rule 10b5-1 plans and
accelerated share repurchase or other structured repurchase
transactions, and/or privately negotiated transactions; the
Company’s receipt of any required approvals to the aforementioned
renovation of its New York City flagship store and expansion of its
retail operations to 6 East 57th Street, as well as the timing of
such approvals; changes in the cost and timing estimates associated
with the aforementioned renovation and expansion; delays caused by
third parties involved in the aforementioned renovation and
expansion; any casualty, damage or destruction to the Company’s
flagship store or 6 East 57th Street; and the Company’s ability to
successfully control costs and execute on, and achieve the expected
benefits from, the operational initiatives and strategic priorities
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 and priorities. 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 in “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, 2019 and in “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 and Form 10-Q 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 currency 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
tables reconcile the sales percentage increases (decreases) from
the GAAP to the non-GAAP basis versus the previous year:
First Quarter 2019 vs. 2018
GAAPReported
TranslationEffect
Constant-Exchange-Rate Basis
Net
Sales:
Worldwide (3 )% (3 )% — % Americas (4 ) — (4 ) Asia-Pacific (1 ) (4
) 3 Japan (4 ) (4 ) — Europe (4 ) (8 ) 4 Other 17 — 17
Comparable
Sales:
Worldwide (5 )% (3 )% (2 )% Americas (5 ) (1 ) (4 ) Asia-Pacific (5
) (5 ) — Japan (4 ) (4 ) — Europe (7 ) (8 ) 1 Other (17 ) — (17 )
First Quarter 2019 vs. 2018
GAAPReported
TranslationEffect
Constant-Exchange-Rate Basis
Jewelry sales by
product category:
Jewelry collections 1 % (3 )% 4 % Engagement jewelry (6 ) (4 ) (2 )
Designer jewelry (14 ) (3 ) (11 )
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.
TIFFANY & CO. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
(Unaudited, in millions, except per share amounts)
Three Months EndedApril 30,
2019 2018 Net sales
$ 1,003.1 $ 1,033.2
Cost of sales
383.9 382.3 Gross profit
619.2 650.9 Selling, general and administrative
expenses
458.3 446.6 Earnings from operations
160.9 204.3 Interest and other expenses, net
9.4 13.8 Earnings from operations before
income taxes
151.5 190.5 Provision for income taxes
26.3 48.2 Net earnings
$ 125.2
$ 142.3 Net earnings per share: Basic
$
1.03 $ 1.14 Diluted
$ 1.03 $
1.14 Weighted-average number of common shares: Basic
121.4 124.4 Diluted
121.9 125.0
TIFFANY & CO. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)
April 30, 2019 January 31, 2019
April 30, 2018
ASSETS
Current assets: Cash and cash equivalents and short-term
investments
$ 762.7 $ 855.3 $ 1,211.9 Accounts
receivable, net
210.5 245.4 227.7 Inventories, net
2,453.8 2,428.0 2,317.6 Prepaid expenses and other current
assets
215.8 230.8 223.0 Total current
assets
3,642.8 3,759.5 3,980.2 Operating lease right
of use assets
1,066.1 — — Property, plant and equipment, net
1,019.2 1,026.7 965.6 Other assets, net
547.6
546.8 504.8
$ 6,275.7 $ 5,333.0
$ 5,450.6
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities: Short-term borrowings
$
142.1 $ 113.4 $ 96.7 Accounts payable and accrued
liabilities
392.6 513.4 380.6 Current portion of operating
lease liabilities
226.3 — — Income taxes payable
40.6
21.4 124.3 Merchandise credits and deferred revenue
72.1
69.9 82.7 Total current liabilities
873.7 718.1 684.3 Long-term debt
881.2 883.4
882.9 Pension/postretirement benefit obligations
284.9 312.4
290.7 Long-term operating lease liabilities
952.1 — — Other
long-term liabilities
111.8 257.1 286.1 Deferred gains on
sale-leasebacks
— 31.1 38.0 Stockholders’ equity
3,172.0 3,130.9 3,268.6
$
6,275.7 $ 5,333.0 $ 5,450.6
TIF-E
TIF-D
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version on businesswire.com: https://www.businesswire.com/news/home/20190604005276/en/
Mark L. Aaron212-230-5301mark.aaron@tiffany.com
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