Tiffany And Signet Report Declines In Second Quarter Sales

Two of the most important jewelers in North America report a decline in total sales and comparable store sales during the second quarter of 2016.

Tiffany & Co.
The luxury retail jeweler said worldwide net sales for the second quarter fell 6 percent to $932 million and comparable store sales dropped 8 percent, year-over-year. Exchange rates seemed to have little effect on the global declines, with the exception of Japan. On a constant-exchange-rate basis, worldwide net sales and comparable store sales declined 6 percent and 9 percent, respectively.

Sales declines were reported throughout all of its regions, with the exception of Japan. The company, which operates 311 stores around the world, attributes the drop in sales to decreased activity from local customers and foreign tourists.

The latest quarter brings worldwide net sales to $1.8 billion for the first half of the year—7 percent below the first half of the prior year and comparable store sales declined 9 percent. On a constant-exchange-rate basis, worldwide net sales and comparable store sales declined 6 percent and 9 percent, respectively.

“The global environment continues to reflect well known challenges that we believe have had broad effects on spending by local customers, as well as foreign tourists, especially from China,” said Frederic Cumenal, Tiffany & Co. CEO. “We are managing expenses efficiently, but also maintaining our marketing spending as a percentage of sales and continuing to invest in key strategic initiatives and opportunities to further strengthen Tiffany's competitive position among global luxury brands.”

Net sales by region are as follows:

In the Americas, total sales of $434 million in the second quarter and $837 million in the first half were both 9 percent below last year, with declines of 9 percent and 10 percent, respectively, in comparable store sales. On a constant-exchange-rate basis, total sales and comparable store sales declined 8 percent and 9 percent, respectively, in both the second quarter and first half. Tiffany attributed the declines to lower spending by U.S. customers as well as by Chinese and other foreign tourists.

In the Asia-Pacific region, total sales of $230 million in the second quarter and $469 million in the first half were down 6 percent and 7 percent, respectively, lower than the prior year, and comparable store sales declined 12 percent and 13 percent, respectively. On a constant-exchange-rate basis, total sales and comparable store sales declined 3 percent and 9 percent, respectively, in the second quarter and 4 percent and 11 percent, respectively, in the first half. Sales growth in China and Korea was offset by a continuation of significant declines in Hong Kong and more moderate declines in most other markets.

In Japan, total sales increased 10 percent to $138 million in the second quarter and rose 9 percent to $269 million in the first half. Comparable store sales increased of 13 percent and 12 percent, respectively. However, on a constant-exchange-rate basis, total sales and comparable store sales declined 5 percent and 3 percent, respectively, in the second quarter and declined 2 percent and rose 1 percent, respectively, in the first half. Management noted lower spending by Chinese tourists in both periods.

In Europe, total sales declined 12 percent to $111 million in the second quarter and 11 percent to $208 million in the first half of 2016. Comparable store sales fell 17 percent and 16 percent for the period. On a constant-exchange-rate basis, total sales and comparable store sales declined 8 percent and 13 percent, respectively, in the second quarter and 7 percent and 13 percent, respectively, in the first half. Lower sales in continental Europe were attributed to weak demand by foreign tourists and local customers, in contrast to better performance in the UK.

Other sales declined 3 percent to $18 million in the second quarter and 20 percent to $40 million in the first half, reflecting comparable store sales declines of 22 percent and 21 percent, respectively. Management noted lower retail sales in the United Arab Emirates and an increase in wholesale sales of diamonds.

Signet Jewelers
The dominate retail jeweler in the U.S., Canada and the U.K. reported a year-over-year sales decline of 2.6 percent to $1.37 billion. Total sales on a constant currency basis declined 1.3 percent. Comparable store sales decreased 2.3 percent compared to an increase of 4.2 percent in the second quarter of the prior year.

The company said “the decline was fairly broad-based across most store banners and merchandise categories and was particularly pronounced in energy-producing regions.”

“We are disappointed by our Q2 results and market conditions have been challenging particularly in the energy-dependent regions,” added Mark Light, Signet Jewelers CEO. “We achieved some important wins in the second quarter. Select diamond fashion jewelry, bracelets, and earrings sold well. We saw success in a variety of selling channels including outlets, kiosks, and on-line due to improvements in our consumer websites and mobile sites. The Zale integration is running well and synergies remain on target. We remain confident in the medium and long-term prospects of our business.”

Signet Jewelers second quarter sales by operating segment is as follows:

• The Sterling Jewelers division (which consists of U.S. retail chains Kay, Jared and regional US brands) saw comparable store sales fall 3.1 percent with the average transaction value down 0.8 percent. The company attributed this to “relatively stronger sales of several fashion and diamond jewelry collections as compared to higher-priced bridal jewelry.” The number of transactions decreased 3 percent. 

• Zale Jewelry division (which includes Zale and Gordon stores in the US, Canada and Puerto Rico along with Peoples Mappins stores in Canada) saw same store sales decrease by 3 percent. ATV increased 1.2 percent “driven by higher sales of select diamond jewelry collections,” the company said. The number of transactions decreased 4 percent.

• Piercing Pagoda's same store sales increased 6.4 percent. ATV increased 17 percent while the number of transactions decreased 7.7 percent. The higher sales “were driven principally by strong sales of gold chains and diamond jewelry. Transactions declined primarily due to fewer piercings.”

• In the UK Jewelry division (which consists of H.Samuel and Ernest Jones) same store sales increased 0.8 percent. ATV increased 2.5 percent “driven principally by strong sales of diamond jewelry and prestige watches,” while the number of transactions decreased 3 percent due to lower sales in fashion watches, the company said. 
Ecommerce sales, which have seen robust growth in recent years, continued this path in the second quarter with a 5.6 percent increase to $69.6 million. This total accounts for 5.1 percent of total sales for the period. 

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Signet Jewelers Sales Up 3.2%, Comps Up 2.4% in First Quarter

Signet Jewelers dominance of the U.S. jewelry market is undeniable. It is by far the largest and most diverse fine jewelry retailer in the U.S. To add to its U.S. success, the company also is the largest jewelry retailer in Canada and the U.K., with more than 3,600 stores in the three countries. 

However, it is in the U.S. where its dominance is the most formidable where it operates the three leading brands in various market categories:

* Kay Jewelers, which serves the mid market and is the largest specialty retail jewelry store in the US based on sales with more than 1,000 stores in 50 states;

* Zales, diamond jewelry specialists with more than 700 U.S. stores and 10 stores in Puerto Rico; and 

* Jared The Galleria Of Jewelry, upper-middle market jewelry retailer with more than 250 free-standing stores in 39 states. 

Signet’s strength was reinforced Thursday as the company reported that sales rose 3.2 percent to $1.58 billion and comparable store sales increased 2.4 percent, year-over-year, for the first quarter of fiscal 2017. More importantly for shareholders the company said diluted earnings per share grew a remarkable 26.4 percent and adjusted EPS grew an equally impressive 20.4 percent for the same period.

Signets results followed a disappointing earnings report from Tiffany & Co. a day earlier where the luxury jeweler saw total sales in the Americas fall by 9 percent to $403 million and comparable store sales declined 10 percent, year-over-year.

Mark Light, Signet Jewelers CEO, credits its promotions, tight operating margins and real estate management for the solid sales and earnings results at a time when the U.S. jewelry industry on the macro level continues to be choppy. 

“We gained profitable market share despite a challenging retail environment through strong sales of ‘Ever Us’ and other fashion jewelry collections as well as select branded bridal,” Light said. “Our 26 percent EPS growth was driven by higher same store sales and total sales along with solid expense management and synergies, leading to 190 basis points of operating margin expansion. In addition to delivering earnings results at the top end of our guided range, we achieved sales growth across real estate formats and in each of our divisions and our credit metrics showed strong sequential improvement.”

Signet’s dominant U.S. performance from its major brands hasn’t rubbed off on the handful of regional U.S. brands it owns and its Canadian operation. Its U.K. business showed improvement this quarter. Regardless, Signet's major U.S. brands account for approximately 83 percent of total sales for the company, so the drag from its smaller operations hasn’t had much of an effect on its bottom line. 

Other financial highlights for the first quarter of fiscal 2017 include: 

* Ecommerce sales increased 4.2 percent to $80.1 million, accounting for 5.1 percent of total sales. 

* Overall, average transaction value was higher and number of transactions was lower due to merchandise mix. 

* Comparable store sales for Sterling Jewelers (which includes Kay, Jared and regional brands) increased 2.3 percent, ATV increased 5.7 percent and the number of transactions decreased 5.6 percent. “This was driven principally by strong sales of select branded bridal jewelry as well as fashion jewelry and lower sales of Charmed Memories and low-priced promotional items, which tend to drive more transactions,” the company said. 

* Comparable store sales for Zale Jewelry (dominated primarily by Zales in the U.S. and several Canadian retail brands) increased 2 percent, ATV increased 5.8 percent, while the number of transactions decreased 3.7 percent. “This was driven primarily by strong sales of diamond fashion jewelry as well as branded bridal and lower sales of low-priced promotional items which tend to drive more transactions.” 

* Comparable store sales for Piercing Pagoda (its mall kiosk operation) increased 5.6 percent, ATV increased 13.7 percent, while the number of transactions decreased 6.9 percent. “The higher sales were driven principally by strong sales of gold chains and diamond jewelry. Transactions declined primarily due to fewer piercings.”

* Comparable store sales for Signet's UK jewelry operation increased 3.4 percent, ATV increased 4.3 percent and the number of transactions decreased 1 percent. “This was driven principally by strong sales of diamond jewelry and prestige watches. Transactions declined due primarily to beads and fashion watches.”

It has been two years since Signet closed the acquisition of Zale, its former biggest rival, and Light said the “integration continues to go extremely well across all aspects of our business. The synergies we expect to deliver this year will be mostly driven by operating expense savings as a result of the sound investments and strategic management of the integration over the past couple of years.”

He continued: “Learnings from our customer segmentation study and business results since the acquisition have validated our growth assumptions, and we have an enviable position with the three leading U.S. brands in a heavily fragmented and growing middle market jewelry industry.  We are pursuing the opportunity to grow square footage both near-term, driven principally by Kay, and medium-term driven more by Zales.” 

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Tiffany's Global Net Sales Down 7%, Comps Down 9%

Tiffany & Co. on Wednesday reported that worldwide net sales declined 7 percent to $891 million and comparable store sales declined 9%, year-over-year, for the first quarter of 2016. Sales declined in all regions except Japan, which the luxury jeweler attributes to “a continuation of softness in spending by both local customers and foreign tourists.”

Net earnings were also lower than the prior year resulting from a decline in the operating margin, as improved gross margin was more than offset by a lack of sales leverage on operating expenses, the New York-based company said

On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 7 percent, and comparable store sales declined 9 percent.

Net earnings fell 17 percent year-over-year to $87 million. 

“As expected, this was a difficult quarter in terms of both sales and earnings growth,” said Frederic Cumenal, Tiffany & Co. CEO. “We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong.”

Net sales by region in the first quarter are as follows:

In the Americas, total sales fell 9 percent to $403 million and comparable store sales declined 10 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales declined 8 percent and 9 percent, respectively, due to “varying degrees of softness in spending by U.S. customers and foreign tourists.”

In the Asia-Pacific region, total sales fell 8 percent to $238 million and comparable store sales declined 15 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales declined 5 percent and 12 percent, respectively. The company said total sales growth in China and Korea was offset “by a continued significant decline in Hong Kong and more moderate declines in other markets.”

In Japan, total sales of $131 million were 8 percent above the prior year and comparable store sales increased 12 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales rose 1 percent and 5 percent, respectively. Management attributed the sales growth to higher spending by local customers.

In Europe, total sales fell 9 percent to $97 million and comparable store sales declined 15 percent, year-over-year. On a constant-exchange-rate basis total sales and comparable store sales declined 7 percent and 14 percent, respectively, “due to softness in most countries, led by France, attributed largely to lower foreign tourist spending.”

Other sales declined 30 percent to $22 million, and comparable store sales declined 21 percent, reflecting lower retail sales in the United Arab Emirates and wholesale sales in other markets.

Tiffany updated its full year earnings forecast and now expects a decline by a mid-single-digit percentage from 2015’s adjusted earnings per diluted share. 

Tiffany opened two company-operated stores in the first quarter (in Europe) and closed one location (in Japan). As of April 30, the company operated 308 stores (124 in the Americas, 81 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE), compared with 298 stores a year ago (123 in the Americas, 75 in Asia-Pacific, 56 in Japan, 39 in Europe, and five in the UAE).

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Signet Jewelers Q2 Sales Rise 15.1% With All National Store Brands Contributing

Signet Jewelers said Thursday second quarter sales in its US and UK stores increased 15.1 percent year-over-year to $1.41 billion. Same store sales increased 4.2 percent for the same period. 

The company’s eCommerce sales rose 30.5 percent to $65.9 million. Profit increased 7.2 percent to $62.2 million. 

The Bermuda-based company owns more than 3,600 retail locations, including Zale and Kay Jewelers brands in the U.S. as well as the Ernest Jones brand in the UK, said the sales increase “was driven by positive sales performance across all national store brands.” 

The company added that in the second quarter, an operational change related to the Sterling division’s extended service plans associated with ring sizing favorably impacted earnings. 

Second quarter sales by division are as follows:

* Sterling Jewelers division (which includes Kay Jewelers and Jared) reported that total sales increased 5.9 to $858.5 million. Same store sales increased 3.3 percent. Signet said sales increases “were broad-based across store banners, product brands and non-brands, as well as multi-channels. Bridal and diamond jewelry was particularly strong.” The average transaction price increased by 4.2 percent while the number of transactions decreased by 2.5 percent, due primarily to merchandise mix.

* Zale Division (a new Signet division that consists of former Zale Corp. brands, such as Zales, Piercing Pagoda stores in the US and Canada) saw its sales increase by 57.3 percent to 389.3 million. Same-store sales rose 5.8 percent for the period. 

* UK Jewelry division total sales declined by 2.3 percent to 159.1 million. The decreases were “driven entirely by foreign currency exchange rates,” Signet said. Same-store sales increased 5.1 percent. The average transaction price and number of transactions for the division increased by 4.3 percent and 1.8 percent, respectively, due to the merchandise mix. 

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Tiffany Reports Q1 Sales Up 13%, Comps Up 11%

Tiffany Butterfly Tiara from the Blue Book Collection. Pink spinels and round brilliant diamonds adorn an exquisitely handcrafted platinum tiara in a butterfly motif. Carat total weight: round brilliant diamonds, 19.97; pink spinels, 10.98; marquise diamonds,  0.73. $150,000.

Tiffany & Co. said Wednesday that worldwide net sales in the first quarter increased 13 percent, year-over-year, to $1 billion led by strong results in nearly all regions and product categories. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars worldwide net sales rose 15 percent and comparable store sales rose 11 percent due to growth in most regions.

The luxury retailer known for its diamond, gem, gold and silver jewelry said the spike in sales was combined with an improved operating margin, resulting in a growth in net earnings to $126 million, or $0.97 per diluted share, from $84 million, or $0.65 per diluted share.

The New York-based luxury jewelry retailer also increased its earnings forecast for the current fiscal year.

Sales by region are as follows:

In the Americas, total sales increased 8 percent to $439 million. On a constant-exchange-rate basis, total sales rose 9 percent and comparable store sales rose 8 percent, primarily due to geographically broad-based growth across the U.S.

In Asia-Pacific, total sales rose 17 percent to $261 million. On a constant-exchange-rate basis, total sales increased 19 percent and comparable store sales rose 10 percent with noteworthy growth throughout Greater China and in Australia.

In Japan, total sales surged 20 percent to $174 million. On a constant-exchange-rate basis eliminating the negative effect of a weaker yen versus the U.S. dollar, total sales and comparable store sales rose 29 percent and 30 percent. 

In Europe, total sales rose 9 percent to $101 million. On a constant-exchange-rate basis, total sales rose 2 percent and comparable store sales declined 3 percent. Trends were similar in the U.K. and in continental Europe.

Other sales increased 39 percent to $37 million, primarily due to retail sales growth which included 18 percent comparable store sales growth in the United Arab Emirates and the opening of the first company-operated Tiffany & Co. store in Russia. Other sales also benefited from an increase in wholesale sales of diamonds; such diamonds are a result of the company's rough diamond sourcing operations.

“This is an excellent and encouraging start to the year,” said Michael J. Kowalski, Tiffany chairman and CEO. “We were pleased with the strong and broad-based sales growth across most regions and product categories and our ability to leverage those improved sales into very significant growth in operating and net earnings. Strength in fine and statement jewelry sales continued, while sales of our new or expanded jewelry collections accelerated, led by our ATLAS collection."

Based on the results, Tiffany increased its earnings forecast for the fiscal year ending January 31, 2015, to a range of $4.15-$4.25 per diluted share, versus its previously-published forecast of $4.05-$4.15 per diluted share.

Tiffany opened four stores in the first quarter (including a store on the Champs Elysees in Paris) and closed one in the US. The company now operates 292 stores (121 in the Americas, 72 in Asia-Pacific, 55 in Japan, 38 in Europe, five in the U.A.E. and one in Russia), versus 275 stores a year ago.

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2013 Holiday Sales Mostly Positive at Tiffany, Signet, Zale Corp.

The three largest jewelry retailers performed well enough during what was described as a challenging holiday sales period. 

Signet Jewelers, Tiffany & Co. and Zale Corp. experienced a November-December sales period that saw more competition for fewer shoppers. However, each company employed strategies that allowed them to make the most of the holiday season. 


Signet Jewelers
The largest specialty retailer in the US and UK, said that its US sales increased 7.9 percent year-over-year for the eight-week period ended December 28 to $1.07 billion. Same store sales for the period rose by 4.9 percent. However, the company did note that “additional discounting was necessary” in a competitive environment.

Sales at Kay Jewelers and Jared The Galleria Of Jewelry, its largest retail chains, rose 8.9 percent to $674.8 and 11.6 percent to $312.5 million, respectively, while sales at its regional brands fell 9.2 percent to $85.4 million.

Same store sales at Kay and Jared both increased 5.6 percent, while its regional brand holdings fell 2.3 percent for the period. 

“The US holiday season was highlighted by a strong November and a strong finish to December,” said Mike Barnes, Signet CEO. “However, additional discounting was necessary in a highly promotional retail environment that included challenging customer traffic trends and lower than anticipated commodity cost savings. We believe these factors will result in lower than expected gross margins and profitability versus our original expectations.”

In Signet’s UK division, which accounts for 19 percent of the company’s total revenues, sales for the eight-week holiday period increased 6.6 percent to $203.6 million year-over-year. Same store sales in the UK were up 5.2 percent.

Overall sales for Signet Jewelers In the eight-week period ended December 28, increased 7.7 percent to $1.27 billion. Same store sales increased 5 percent “driven by balanced strength across a variety of brands and categories.” 

Signet operates more than 1,400 stores in the US and 500 stores in the UK.

In addition, consolidated eCommerce sales increased 27.2 percent for the period, with a 24.8 percent increase in the US and a 37.5 percent increase in the UK.


Tiffany & Co.
The international luxury retail jeweler said Friday that total sales in the Americas region (which largely reflects US sales) rose 6 percent to $550 million for the holiday period ended December 31. On a constant-exchange-rate basis, total sales increased 7 percent while same store sales rose 7 percent due to what the company describes as “broad-based sales growth across most of the region.” The company operates 121 stores in the Americas.

The company reported that worldwide net sales for the period rose 4 percent to $1.03 billion. On a constant-exchange-rate basis worldwide net sales increased 8 percent due to growth in all regions. Same store sales increased 6 percent. 

“Tiffany enjoyed a good holiday season with overall sales results in line with our expectation, and we were pleased to see growth across our fine and statement, engagement and fashion jewelry categories,” said Michael J. Kowalski, Tiffany chairman and CEO.


Zale Corp.
Meanwhile, Zale Corp. reported same store sales for the holiday period increased 2 percent at constant exchange rates, or 0.7 percent on a US dollar reported basis led by a 3.5 percent rise in US same-store sales. 

Overall, the specialty retailer reported a 2 percent drop in holiday sales to $556 million, saying it is due to a closing of 91 stores during the year and a decline in the Canadian exchange rate. 

The Dallas-based company currently operates 1,064 fine jewelry stores and 630 kiosks in the United States, Canada and Puerto Rico, with the US being, by far, its largest market. 

The company’s US fine jewelry brands, consisting of Zales Jewelers, Zales Outlet and Gordon’s Jewelers, posted a same store sales increase of 3.5 percent. This increase follows a 2.2 percent rise in the same period last year.

Canadian fine jewelry brands, consisting of Peoples Jewellers and Mappins Jewellers, posted a same store sales increase of 0.5 percent at constant exchange rates, following a decline of 0.7 percent in the same period last year. On a US dollar reported basis, same store sales decreased 5.9 percent, following a 2.7 percent increase in the same period last year.

Piercing Pagoda, Zale Corp.’s kiosk jewelry business, posted a same store sales decline of 5.1 percent. In the same period last year, same store sales rose 1.7 percent.

“During the holiday period, we maintained our focus on increasing exclusive product penetration, driving gross margin improvement and building our core national brands,” said Theo Killion, Zale Corp. CEO. “We executed a solid holiday season despite a challenging retail environment.”

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US Sales Remain Strong At Signet Jewelers While UK Sales Disappoint

Signet Jewelers, the largest specialty retail jeweler in the US and the UK, said Thursday that second-quarter year-over-year sales increased 3.1 percent to $880.2 million. Same store sales for the period increased 3.6 percent year-over-year while eCommerce sales grew 7 percent to $31.2 million.

This was offset by a 1.2 percent decline in net income to $67.4 million. During a conference call Thursday, Mike Barnes, Signet CEO, said the decline was primarily due to the costs associated with the acquisition of the Ultra outlet jewelry store chain and the conversion of many of them to Zale Outlet stores, and lower gross margins compared to other Signet holdings. Without Ultra, earnings per share were up 5.9 percent.

In the company’s US division, which now accounts for nearly 85 percent of total sales for the company, sales increased 5.6 percent to $741.1 million. Same store sales increased 4.9 percent for the period. Sales increases were driven by strength in bridal, colored diamonds and watches. Signet owns 1,449 jewelry retail stores that operate under the brand-names Kay, Jared, Kay Outlet stores, Ultra and stores and some regional brands.

Kay and Jared experienced increases in both transaction counts and average transaction value. Meanwhile, eCommerce sales increased 36 percent to $25.3 million.

In the UK division, total sales declined 8.5 percent to $139.1 million in the second quarter. Same store sales decreased 2.4 percent. The company said the sales decline was primarily due to a same store sales decrease of $3.4 million, the impact of closed stores of $5.6 million and currency fluctuation of $3.9 million. Signet owns 500 retail stores that operate under the H.Samuel and Ernest Jones names.

The company said that at Ernest Jones, the number of transactions increased driven primarily by strength in branded bridal and watches, excluding Rolex, and the average transaction value was lower, primarily due to the impact from Rolex being offered in fewer stores. In H.Samuel, the number of transactions declined, primarily due to store closures and lower traffic. This resulted in lower sales across many merchandise categories, partly offset by strength in branded bridal products. Sales in both businesses were impacted by lower bead transactions. UK eCommerce sales in the UK increased 5.4 percent to $5.9 million, which include 45 percent coming to the websites through mobile devices, Barnes said.

Barnes noted during the conference call that Signet is in the process of updating its websites and mobile presence to take advantage of the increased traffic.

Other second quarter highlights:

* Gross margin declined, falling to $309.7 million or 35.2 percent of sales, compared to $311.2 million or 36.4 percent of sales in the second quarter fiscal 2013. The includes the results for Ultra increased gross margin dollars by $5.7 million; however, it reduced the consolidated gross margin rate by 50 basis points and the US gross margin rate by 70 basis points. The Ultra gross margin is lower than the core US business due to lower Ultra store productivity and the impact of the Ultra integration.

* Gross margin dollars in the US increased by $1.3 million compared to second quarter of fiscal 2013, reflecting higher sales offset by a gross margin decrease of 180 basis points. The company said the lower gross margin was primarily attributed to a gross merchandise margin decrease by 50 basis points, attributed to Ultra; and store occupancy and operating costs deleveraged by 70 basis points, of which 40 basis points was due to Ultra. The remaining 30 basis point change was due to the increase of new store openings.

* The US net bad debt ratio increased to 4.9 percent of sales compared to 4.5 percent of sales in prior year second quarter. The increase in the ratio was primarily due to the growth in the outstanding receivable balance. In addition, the US division experienced a “slight decline in collection efficiency” and a change in the credit mix. In the UK, gross margin dollars decreased $2.8 million, primarily reflecting the impact of decreased sales and currency fluctuation offset by a gross margin rate increase of 40 basis points.
.
* Selling, general and administrative expenses increased 4.2 percent to $250.5 million. As a percentage of sales, SGA increased by 40 basis points to 28.5 percent. This includes the results for Ultra, which increased SGA by $13.5 million and increased the consolidated SGA rate by 70 basis points. The company said Ultra’s SGA is expected to decline as the final steps of the integration are completed.

* Operating income fell 4.9 percent to $105.5 million. Operating margin declined 100 basis points to 12 percent.

* The US division’s operating income including Ultra declined 4.9 percent to $111.5.

* Operating margin for the US division including Ultra was 15 percent, compared with 16.7 percent in fiscal 2013, down 170 basis points. Excluding Ultra, the US division’s operating income was $119.3 or 16.8 percent of sales, up 10 basis points.

In its guidance, the company said it expects same store sales to rise in the low-single digit for the third quarter.

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Pandora Jewelry Q2 Revenue Up 53%

Pandora charm bracelet

Danish jewelry company, Pandora, continues its comeback that began to show promise earlier this year with a year-over-year 53 percent increase in revenue to 1.9 billion kroner ($343 million) for the second quarter of 2013. Net income rose 22 percent for the period to 431 million kroner ($76.5 million).

The company did note that comparable figures for the second quarter of 2012 were impacted by the company’s stock balancing campaign conducted in 2012, where it replaced unwanted products after demand collapsed two years ago.

The international company known for its charm jewelry and silver jewelry posted robust double-digit sales growth in all regions where it operates:

• Americas increased by 52.1 percent (54.3% increase in local currency)
• US increased 53.9 percent (55.6% increase in local currency)
• Europe increased by 59.3 percent (59.8% increase in local currency)
• Asia Pacific increased by 43.5 percent (42.4% increase in local currency)

Gross profit for the quarter increased 49 percent to 1.27 billion Danish kroner ($225 million). This corresponds to a gross margin of 66 percent, compared to 67.9 percent in the second quarter of 2012 and 65.6 percent in the first quarter of 2013. The company said the decrease in gross margin was primarily due to the expiration of the suspension of import duties on goods from Thailand (where the company manufactures its jewelry) into the U.S. “The increase in the gross margin compared to Q1 2013, was due to a decrease in commodity prices,” the company said.

EBITDA for the second quarter increased by 140.9 percent to 530 million Danish kroner ($94.1 million) resulting in an EBITDA margin of 27.4 percent, compared to 17.5 percent in the same period of the prior year. 

Pandora—which designs, manufacturers, markets and sells its jewelry wholesale and retail—said its volumes increased by 40 percent year-over-year and the average sales price increased nearly 9 percent.

On 30 July 2013, Pandora is sticking to an upgrade in its financial guidance, first announced July 30, to 8 billion kroner ($1.42 billion), compared with its previous guidance of 7.2 billion kroner and expects an EBITDA margin of approximately 27 percent, up two points from its previous guidance.

The company also plans to increase the number of its popular “concept stores” that it plans to open for the year, from 150 to 175.

“The solid performance reported for Q1 2013 has continued across all major markets in the second quarter, with strong sales from newly launched products, high replenishment rates and healthy sell-out from the concept stores,” said Allan Leighton, Pandora CEO. “Our strategy of delivering affordable luxury is becoming increasingly relevant, and although there are still many areas in which we can improve we are pleased with our progress.”

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Swatch Group Sees Strong Growth Potential For Harry Winston

The Harry Winston salon in Paris.

The Swatch Group has big plans for the recently acquired Harry Winston brand, finding it an asset that is both complimentary and with plenty of room for growth.

The Swiss conglomerate on Tuesday for the first time partly revealed what it plans for the luxury retail brand during its earnings report for the first half of the year. The company, which now owns 20 watch and jewelry brand, said that gross sales for the period increased 8.7% year-over-year to 4.18 billion Swiss francs ($4.47 billion). Net income increased 6.1% compared to the first half of 2012 to 768 million Swiss franc ($821,700), with a 19.2% return on net sales. Sustained growth was reported in all regions.

“The continued integration of the Harry Winston brand will … make a significant contribution, as this brand has huge, almost untapped market potential in the high jewelry and watches activities,” the company said, adding that this potential will start to be seen in the second half of the fiscal year.

Swatch Group said that following its $1 billion acquisition of Harry Winston in March, the conglomerate invested in infrastructure, settled all debts, expanded its equity capital base and increase inventory. “The latter was initiated in order to ensure that our clientele has access to the best selection of jewelry as well as to increase its availability,” Swatch Group said in its earnings statement.

“The acquisition of the Harry Winston brand did more than simply round off the group’s already broad brand portfolio; it also expanded the high jewelry segment, along with the segment’s value chain from production up to and including the retail network,” Swatch added.

In May, Swatch Group, in Harry Winston’s name, purchased a 101.73-carat diamond at auction for $26.7 million and renamed it the “Winston Legacy,” explaining that it “reconfirms the number one position of this high jewelry brand.”

Swatch says that its see the luxury watch segment of the brand as having the best potential for worldwide growth.

“The Harry Winston brand has an extremely large and almost untapped potential in the watch sector, which the group now aims to expand further using its experience around the world,” the company said. “The necessary funds will also be invested into this activity.”

In fact, the acquisition led to some company restructuring by integrating the production division into the watches and jewelry business unit. “This integration will also provide a more uniform view of activities, facilitating comparability with our competitors.”

Other highlights of the company’s first-half report include:

• Benchmarked to the 1.5% export growth for wristwatches of the Swiss watch industry in the first half of 2013, the segment Watches & Jewelry (now including production) growth was more than 9%.

• An operating profit of 910 million Swiss francs ($973,500) was recorded, with an operating margin of 22.7%, despite a high marketing spend, important investments in products and production methods, and the integration of Harry Winston.

The company said its outlook “remains very promising,” expecting a strong second half. 

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Tiffany Reports Strong Sales Growth in All Regions

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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LVMH Watch and Jewelry Revenue Down 1%

LVMH Moët Hennessy Louis Vuitton, said Monday that first quarter revenue for its Watches and Jewelry division fell 1 percent to 624 million euros ($815.6 million) due to cautious buying by multi-brand retailers. It was the only business division in the luxury goods conglomerate to show a decline in revenue for the period. In organic terms (with comparable structure and constant exchange rates), revenue grew 2 percent.

TAG Heuer’s first quarter was marked by the 50th anniversary of its Carrera line and the new partnership with McLaren which was announced at the Geneva Motor Show. Hublot and Zenith also had a good start to the year. In jewelry, Bulgari “recorded strong revenue growth in its own stores,” largely based on the success of its Serpenti line.

Other brands in the division are Hublot, Zenith, Chaumet, Fred and De Beers Diamond Jewellers.

LVMH said total revenue for the 2013 fiscal year increased 6 percent to 6.94 billion euros ($9.07 billion). Organic revenue growth was 7 percent compared to the same period in 2012, which saw a sharp rise.

The Paris-based conglomerate—whose brands also include Moët Chandon, Louis Vuitton, Dior and Sephora—said it saw “strong growth” in Asia and the United States, while Europe “demonstrates good resistance despite a challenging economic environment.”

First quarter results in its other business division are as follows:

The Wines & Spirits division recorded a revenue rise of 6 percent. Champagne sales were “notably robust” in Asia, which compensated for softer demand in Europe. Hennessy cognac had a “solid performance” in the United States and “rapid growth” in China.

The Fashion & Leather Goods division was nearly flat year-over (0.4%) Louis Vuitton “continued its progress,” the company said. Fendi “benefited from continued developments in fur and leather and pursues” and Céline “made excellent progress” in its own stores.

Perfumes & Cosmetics division experienced a 5 percent increase for the period. Christian Dior recorded “solid growth” due to the “vitality of its perfumes and, in particular, the continued strength of J’adore, Miss Dior and Dior Homme. The new lipstick Dior Addict and the premium skincare Prestige also contributed to the brand’s growth. Guerlain continued to benefit from the strong momentum of La Petite Robe Noire and the success of its high-end skincare Orchidée Impériale,” the company said.

In the Selective Retailing division showed a 16 percent increase for the period. DFS had an “excellent performance driven by the continued growth in Asian tourism.” Sephora gained market share in all its regions as it continues to expand its global store network. Online sales also experienced “rapid growth.”

“In an economic environment which remains uncertain in Europe, LVMH will continue to focus its efforts on developing its brands, will maintain a strict control over costs and will target its investments on the quality, the excellence and the innovation of its products and their distribution,” the company said. 


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The Former Harry Winston Diamond Corp. Files First Earnings Report Under New Name; Ekati Mine Acquisition Is Approved; Frédéric de Narp Reportedly Resigns

The new Dominion Diamond Corp. logo.

Dominion Diamond Corp., the company formerly known as Harry Winston Diamond Corp., said that consolidated sales from continuing operations increased 8 percent to $110.1 million for the fourth quarter. The increase was the result of an improved sales mix, partially offset by a 3 percent decrease in volume of carats sold during the quarter. It also cited increased demand in India, China and the United States.

Meanwhile, operating profit from continuing operations fell 12 percent in the quarter ended Jan 31 to $21 million. Consolidated EBITDA from continuing operations decreased 6 percent to $45.3 million.

Net income from continuing operations fell to $12.1 million, or 14 cents per share, from $12.7 million, or 15 cents per share, a year earlier.

Since 2006, the company operated as two segments: a luxury retail jewelry and watch division under the iconic Harry Winston brand name and a diamond mining business. The company closed its sale of the luxury brand segment to the Swatch Group Ltd. on March 26 in a deal valued at $1 billion. As part of the closing of the transaction, the company changed its name to Dominion Diamond Corp. and its common shares now trade on both the Toronto and New York stock exchanges under the symbol DDC.

The company now operates solely as diamond mining and marketing business and its earnings report reflects this with the results of the luxury brand segment treated as discontinued operations for accounting and reporting purposes.

Other fourth quarter highlights include:

* Rough diamond production during the fourth calendar quarter increased 19 percent to 1.9 million carats.

* The company had 500,000 carats of rough diamond inventory with an estimated current market value of approximately $65 million at January 31, of which approximately $25 million represents rough diamond inventory available for sale, with the remaining $40 million being sorted.

In related news:

* The company previously said it received regulatory approval to complete the $500 million acquisition of the Ekati diamond mine in Canada’s Northwest Territories and diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp and Belgium, from mining company BHP Billiton Canada Inc. Dominion said it expects the transaction to close on or about April 10. It was speculated that the sale of the luxury retail segment was used to finance the acquisition.

* In addition, the company is reportedly interested in buying the remaining stake in Diavik diamond mine. It currently owns a 40 percent share of the mine with the remaining interest owned by mining company Rio Tinto, as Rio has stated a desire to pull out of the diamond business.

* Frédéric de Narp, president and CEO of the Harry Winston luxury segment, has resigned, according to a report in the New York Post. Nayla Hayek, a Swatch board member and daughter of the company’s founder Nicolas Hayek, has assumed de Narp’s role.

“The last year and this first quarter has been a time of great positive change for the company, including changing its very identity,” said Robert Gannicott, Dominion Diamond Corp.’s chairman and CEO. “This change reflects a focus on the production, sorting and sale of diamonds from Northern Canada, a region that we know and understand well. The acquisition of the Ekati Mine, and its operating team, is expected to close next week giving us operational control of both a producing mine and development opportunities in the large scale resources on the Ekati property. Together with our exploration acreage adjacent to the Ekati and Diavik properties, this positions us from grass-roots exploration through development opportunities. We also become the largest supplier of Canadian diamonds sold through an expert sorting and marketing chain that we have perfected through the years of Diavik production.” 

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Another Strong Year for Signet Jewelers

Signet Jewelers, the largest specialty retail jeweler in the U.S. and U.K., continues to benefit from strong retail sales in U.S., which more than offset weaker figures in the U.K.

The Bermuda-based company said Thursday that fourth quarter sales increased 11.8 percent, year-over-year, to $1.51 billion. Same store sales for the period ended Feb. 2, increased 3.5 percent compared to an increase of 6.9 percent in the prior fiscal year. E-commerce sales increased 46.9 percent to $63.9 million.

In its U.S. division sales for the fourth quarter increased 14.2 percent to $1.24 billion. Same store sales increased 4.9 percent compared to an increase of 8.3% in the fourth quarter Fiscal 2012. Sales increases were driven by broad based strength across most merchandise categories in both Kay and Jared retail chains and its acquisition of the Ultra Diamonds retail chain, the fifth largest in the U.S.

In its U.K. division total sales were up 1.8 percent to $268.4 million (fourth quarter Fiscal 2012: $263.7 million). Same store sales fell 1.9 percent compared to an increase of 1.7 percent in the fourth quarter Fiscal 2012. Sales performance was primarily attributed to lower store traffic and increased customer purchases of promotional merchandise, which impacted sales and gross margin.

In Fiscal 2013, Signet's total sales increased 6.2 percent to $3.98 billion. Same store sales were up 3.3 percent compared to an increase of 9 percent in Fiscal 2012. E-commerce sales increased 40.6 percent to $129.8 million.

In the US division total sales for the 2013 fiscal year increased 7.9 percent to $3.27 billion. Same store sales increased 4 percent for the year compared to an increase of 11.1 percent in Fiscal 2012. Sales increases were driven by broad based strength across most merchandise categories in both Kay and Jared, as well as the Ultra acquisition.

The number of merchandise transactions increased in Kay and Jared, the company said. Average merchandise transaction values were up in Kay stores due to changes in sales mix and down in Jared stores due primarily to the discontinuation of Rolex watches. E-commerce sales were $101.4 million compared to $68.5 million in Fiscal 2012, up $32.9 million or 48 percent.

In the U.K. division total sales fell 0.8 percent to $709.5 million. Same store sales increased 0.3 percent compared to an increase of 0.9 percent in Fiscal 2012. Sales performance was primarily attributed to lower traffic particularly in the fourth quarter.

In its guidance the company, which trade on the NYSE, said expectations are for same store sales in the first quarter to be up 5 to 7 percent.

“Signet had an excellent Fiscal 2013 with a 3.3% increase in same store sales and a 16.6 percent increase in earnings per share,” said Mike Barnes, Signet CEO. “The acquisition of Ultra, our share repurchase program and the increase in our quarterly dividend demonstrate our ability to capitalize on our excellent balance sheet to provide for our long-term growth and increase value for our shareholders.”

He added, “We are pleased with our progress quarter-to-date and expect to achieve our goals for the first quarter…. We will continue to advance our expansion goals as we integrate our recently acquired Ultra stores, execute on our multi-channel growth initiatives and expand our store base.”

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Tiffany’s Q4 and Full-Year Sales Up 4%

Tiffany & Co. said Friday net sales in the fourth quarter increased 4 percent to $1.2 billion year-over-year and net earnings rose 1 percent to $180 million. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales rose 5 percent, for the period ended Jan. 31, due to growth in all regions and comparable store sales equaled the prior year.

For the year, also ended January 31, worldwide net sales increased 4 percent to $3.8 billion, year-over-year, while net earnings declined 5 percent to $416 million. Earnings fell 11 percent when excluding nonrecurring items in the prior year.

“These quarterly sales results were consistent with the holiday trends we had issued in early January,” said Michael J. Kowalski, Tiffany chairman and CEO. “While financial results in fiscal 2012 were disappointing due to lower-than-expected sales growth and pressures on gross margin, we continued to maintain a longer-term focus on strengthening global awareness of the Tiffany & Co. brand and on further developing compelling product offerings.”

Kowalski took an optimistic tone for Tiffany’s 2013 outlook. “We will be pursuing important growth opportunities in 2013, with plans including exciting new jewelry collections, enhanced customer communications through print and digital media, and expansion of our global base with additional stores,” he said. “Tiffany is well positioned to achieve net earnings growth of 6 percent – 9 percent and healthy free cash flow.”

Net sales highlights are as follows:

* Total sales in the Americas region increased 2 percent to $620 million in the fourth quarter and 2 percent to $1.8 billion in the full year (representing 48 percent of 2012 worldwide sales). On a constant-exchange-rate basis, total sales increased 2 percent in both the quarter and full year; on that basis, comparable store sales declined 2 percent in both the quarter and full year. Sales in the New York flagship store fell 3 percent in both the quarter and full year, while comparable branch store sales were 2 percent below both prior-year periods with no meaningful geographical differences in the U.S.). Internet and catalog sales rose 6 percent and 4 percent in the fourth quarter and full year.

* In the Asia-Pacific region, total sales rose 13 percent to $254 million in the fourth quarter and 8% to $810 million, or 21% of worldwide sales, in the full year. On a constant-exchange-rate basis, total sales rose 10% in the fourth quarter due to sales growth in Greater China and in other markets and rose 8% in the full year; on that basis, comparable store sales rose 6% in the quarter and 2% in the full year.

* Total sales in Japan declined 6 percent to $192 million in the fourth quarter, reflecting a weaker Japanese yen versus the U.S. dollar. Sales for the full year increased 4 percent to $639 million, or 17 percent. However, on a constant-exchange-rate basis, total sales rose 2 percent in the quarter and 6 percent. Comparable store sales rose 2 percent and 7 percent in the quarter and full year.

* In Europe, total sales increased 3 percent to $146 million in the fourth quarter due to mixed performances by country and also rose 3% to $432 million, or 11% of worldwide sales, in the full year. On a constant-exchange-rate basis, total sales increased 3% and 7% in the quarter and full year and comparable store sales were unchanged in the quarter and rose 2% in the full year.

* Sales categorized “Other,” nearly doubled to $24 million in the fourth quarter and rose 41 percent to $73 million in the full year. The strong growth in both periods reflected the conversion in July of five Tiffany & Co. stores in the United Arab Emirates from independently-operated distribution to company-operated retail stores.

* Tiffany added 28 company-operated stores in the full year: 13 in the Americas with four in the U.S., six in Canada (including four department-store boutiques in Canada that were converted to company-operated locations), two in Mexico and one in Brazil; eight in Asia-Pacific including six in China, one in Australia and one in Singapore; two in Europe including one in France and one in the Czech Republic; and the five stores in the U.A.E. The company currently operates 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 247 stores a year ago.

Tiffany’s other financial highlights:

* Gross margins (gross profit as a percentage of net sales) of 59.1 percent in the fourth quarter and 57 percent for the full year were below margins of 60.4 percent and 59 percent in the respective prior-year periods. The declines largely reflected pressures from precious metal and diamond costs; a shift in sales mix toward higher-priced, lower margin products; and reduced sales leverage on fixed costs.

* SG&A (selling, general and administrative) expenses increased 2 percent in the fourth quarter. In the full year, SG&A expenses increased 2 percent; however, if nonrecurring costs related to the 2011 relocation of Tiffany's New York headquarters staff were excluded, SG&A expense would have increased 5 percent (see "Non-GAAP Measures" schedule) in the full year due to store occupancy costs related to new and existing stores, increased marketing spending and higher labor costs.

* Other expenses, net were $14 million and $54 million in the fourth quarter and full year, compared with $13 million and $43 million in the respective prior-year periods. Increased average borrowing levels have resulted in higher interest expense in both periods.

* Net inventories of $2.2 billion at January 31 were 8 percent higher than the prior year-end, reflecting 13 percent growth in finished goods inventory and 2 percent growth in combined raw materials and work-in-process, all to support new store openings and expanded product assortments.

* Capital expenditures of $220 million in 2012 were modestly lower than $239 million in the prior year; 2011 had included expenditures for the relocation of Tiffany's headquarters staff.

* In the full year, the company spent $54 million to repurchase approximately 813,000 shares of its Common Stock at an average cost of $66.54 per share, but did not repurchase shares in the fourth quarter. Approximately $164 million remains available for repurchases under the currently authorized program which expires in January 2014.

In its outlook, the company expects worldwide net sales to grow 6 percent to 8 percent in U.S dollars. On a constant-exchange-rate basis, an expected high-single-digit percentage increase in worldwide net sales includes sales growth in all regions, ranging from a mid-teens percentage increase in Asia-Pacific to a low-single-digit increase in Japan.

The company said it plans to open 15 new company-operated stores including five in the Americas, seven in Asia-Pacific, three in Europe; while closing one in Japan. It also plans  and to refurbish a number of existing locations around the world.

It expects net earnings from operations increasing 6 percent to 9 percent to a range of $3.43-$3.53 per diluted share. Net earnings from operations are expected to decline approximately 15 percent- 20 percent in the first quarter due to gross margin pressure and higher marketing-related costs, to be followed by earnings growth in all subsequent quarters. In addition, this forecast excludes $0.05 per diluted share of expected first quarter charges for staffing and occupancy adjustments.


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