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Leibish & Co
Monday, March 21, 2011
Tiffany Q4 Sales up 12%, Full-Year Sales up 31%
Tiffany & Co. said Monday fourth quarter worldwide net sales increased 12 percent to $1.1 billion due to growth in all geographic regions. Net earnings from continuing operations for the period rose 31 percent to $181.2 million. For the full year, net sales rose 14 percent to $3.1 billion and net earnings from continuing operations increased 39 percent to $368.4 million. Management also reduced its outlook for the first quarter of 2011 because of the crisis in Japan, where nearly a quarter of its stores are located.
“These strong fourth quarter sales, which were better than the holiday results we had previously reported, were the culmination of an excellent year of strong earnings growth for Tiffany,” said Michael J. Kowalski, Tiffany chairman and CEO. “Our broad-based success reflected healthy comparable store sales growth and successful new store openings in the Americas, Asia-Pacific and Europe, and highly successful new product introductions including our extraordinary yellow diamond collection.”
Net sales highlights by segment for the fourth-quarter and year-end period ended January 31:
* In the Americas region, which includes the U.S., Canada and Latin/South America, sales in the fourth quarter increased 10 percent to $577.1 million and in the full year rose 12 percent to $1.575 billion (representing 51 percent of worldwide sales). On a constant-exchange-rate basis, sales increased 10 percent in the quarter and 11 percent in the full year and comparable store sales increased 8 percent and 8 percent (comparable Americas' branch store sales increased 9 percent and 8 percent and sales in the New York flagship store rose 2 percent and 6 percent). Combined Internet and catalog sales in the Americas increased 8 percent in both the quarter and full year.
* In Asia-Pacific, sales increased 25 percent to $188.3 million in the fourth quarter and 29 percent in the full year to $549.2 million (representing 18 percent of worldwide sales). On a constant-exchange-rate basis, sales rose 21 percent in the fourth quarter, due to strong growth in most countries, and rose 23 percent in the full year; on that basis, comparable store sales rose 16 percent and 14 percent.
* In Japan, sales increased 11 percent to $182.6 million in the fourth quarter and rose 7 percent in the full year to $546.5 million (representing 18 percent of worldwide sales). On a constant-exchange-rate basis, sales increased 2 percent in the quarter and declined 1 percent in the full year; on that basis, comparable retail store sales rose 1 percent and declined 4 percent.
* In Europe, sales increased 14 percent to $137.9 million in the fourth quarter and rose 18 percent in the full year to $360.8 million (representing 12 percent of worldwide sales). On a constant-exchange-rate basis, sales rose 21 percent in the quarter, due to strong growth in the U.K. and most of continental Europe, and increased 23 percent in the full year; on that basis, comparable store sales rose 16 percent and 18 percent.
* The luxury jeweler opened nine branded stores in the fourth quarter, and opened 15 in the full year including five stores in the Americas (Baltimore, Houston, Jacksonville, Los Angeles and Santa Monica), two in Europe (Barcelona and London), seven stores in Asia-Pacific (four in China: Beijing, Shanghai (2) and Kunming; and one each in Seoul, Singapore and Taipei) and one in Japan. The company also closed two locations in Japan. The Company operated 233 stores as of January 31 (96 in the Americas, 56 in Japan, 52 in Asia-Pacific and 29 in Europe).
* Other sales declined 30 percent to $15.3 million in the fourth quarter and increased 2 percent to $54.2 million in the year (2 percent of worldwide sales). Declines in wholesale sales of rough diamonds were partly offset in the quarter and entirely offset in the year by increased wholesale sales of finished goods to independent distributors within emerging markets.
Gross margin (gross profit as a percentage of net sales) rose to 60.9 percent in the fourth quarter from 58.7 percent in the prior year, with the increase primarily reflecting the recapture of higher product costs through retail price increases, as well as manufacturing efficiencies and sales leverage on fixed costs, the company said. Gross margin in the full year rose to 59.1 percent from 56.5 percent in the prior year due to similar factors.
Kowalski said that the company plans to open 21 stores across the Americas, Europe and Asia-Pacific in 2011 and will introduce new products and expand marketing communications efforts.
Japan Crises Kowalski made the following statement about Japan and how it may affect sales and earnings in 2011:
“We are saddened by the tragic events in Japan. Our thoughts are with our more than 700 Tiffany colleagues and with all the people of Japan. Tiffany stores located in the Kanto and Tohoku regions, which generate somewhat more than half of sales in Japan, were closed or operating on reduced hours after the earthquake and tsunami, with physical damage limited to a few stores. Most stores have re-opened over the past weekend. Our stores in the southwestern Kansai region have remained open.
In preparing our financial expectations for 2011, we have assumed some continued periodic store closings or limited store hours in Japan through the end of the first quarter, resulting in worldwide sales growth of 11 percent in the first quarter, with total Japan sales declining 15 percent. This leads us to now expect that earnings in the first quarter will be reduced by approximately $0.05 per diluted share from our initial expectation of $0.62 per diluted share to a new expectation of approximately $0.57 per diluted share (versus the prior year of $0.48). We cannot provide meaningful forecasts about sales in Japan beyond the first quarter and, therefore, have not adjusted our sales or earnings plan for the remaining quarters of 2011.”
Outlook for 2011 Tiffany said it expects worldwide net sales growth of 12 percent – 14 percent for the full year of 2011 (ending Jan. 31, 2012), adding that it was on track to exceed that expectation in the first quarter prior to March 11, when the crises in Japan begun. This figure is based on the following assumptions:
* A low-double-digit percentage increase in the Americas;
* A 20 percent increase in Asia-Pacific;
* A mid-single-digit percentage sales decline in Japan;
* Sales increasing more than 20 percent in Europe; and
* Other sales are expected to increase more than 30 percent.
Net earnings are expected to increase 14 percent to 18 percent for 2011.
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