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 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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Zale Q4 Comps Up 5.6%, Revenue Loss Narrows to $8 Million

Comps at Zales Jewelers (pictured) and Zales Outlet increased 8.1%.

Fine jewelry retailer Zale Corp. said Wednesday that year-over-year revenues for the fourth quarter increased 2.4 percent to $417 million. Comparable store sales for the period increased 5.6 percent. This increase follows an 8.3 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 5.8 percent.

Net loss in the fourth quarter for the company, which owns retail jewelry chains in the US, Canada and Puerto Rico, narrowed to $8 million, or 25 cents per share, compared to a net loss of $20 million, or 61 cents per share, in the fourth quarter of fiscal 2012.

Other fourth quarter highlights include:

* Zales branded stores, Zales Jewelers and Zales Outlet, posted a comparable store sales increase of 8.1 percent. This follows a 12.3 percent rise in the same period last year.

* U.S. fine jewelry brands, including Zales branded stores and regional brand, Gordon’s Jewelers, posted a comparable store sales increase of 7.2 percent. This follows an 11.2 percent rise in the same period last year.

* Peoples branded stores posted a comparable store sales increase of 5.6 percent. This follows a 4.7 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 7 percent in the fourth quarter of fiscal 2013, following an increase of 9.9 percent in the same period last year.

* Canadian fine jewelry brands, Peoples Jewellers and Mappins Jewellers, posted a comparable store sales increase of 3.3 percent. This follows a 2 percent rise in the same period last year. At constant exchange rates, comparable store sales increased 4.7 percent in the fourth quarter of fiscal 2013, following an increase of 7.1 percent in the same period last year.

* Piercing Pagoda, Zale’s kiosk jewelry business, posted a comparable store sales increase of 0.3 percent. In the same period last year, comparable store sales rose 2.7 percent.

Gross margin on sales rose sharply to $222 million, or 53.1 percent, compared to $210 million, or 51.6 percent, in the fourth quarter of fiscal 2012. Operating margin increased 120 basis points.

Operating loss was $3 million, or 0.7 percent of revenues, compared to an operating loss of $8 million, or 1.9 percent of revenues, in the fourth quarter of the prior year.

For the 2013 fiscal year, the company reported a six-year high in net earnings of $10 million, or $0.24 diluted earnings per share, up $37 million, or $1.09 per share. The company said this is a six-year high.

Comparable store sales rose 3.3 percent for the year with Zales branded stores up 4.7 percent and Peoples branded stores up 4.8 percent at constant exchange rates. Gross margin was up 60 basis points to 52.1 percent and operating margin increased 90 basis points to 1.9 percent.

“For the year we achieved a significant milestone by delivering our highest net income in six years,” Theo Killion, Zale Corp. CEO, said in a statement.

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Tiffany Q2 Earnings Up 16%, Global Sales Up 4%

Exceptional growth in China along with improvements in operating margins led to a better-than-expected 16 percent net earnings increase to $107 million, or $0.83 per diluted share, in the second quarter for Tiffany & Co.

Worldwide net sales for the New York-based luxury jeweler rose 4 percent to $926 million. On a constant-exchange-rate basis, worldwide net sales rose 8 percent, and comparable store sales rose 5 percent due to sales growth in most regions.

As a result, the company raised its year-end outlook to $3.50-$3.60 per diluted share, from $3.43-$3.53 per diluted share in its first quarter outlook. It also plans to continue its worldwide expansion of stores unabated.

In addition to regional growth, product categories also performed well, according to Tiffany’s second-quarter earnings report released Tuesday. The results were dampened a bit by lower-than-expected sales growth in the US and the drastic decline of the Japanese Yen.

Mark L. Aaron, Tiffany VP-Investor Relations, said in a conference call Tuesday that growth in fine jewelry and statement jewelry were extremely strong and outperformed modest growth in fashion jewelry. He added that diamond jewelry, led by colored diamonds, did well particularly well for the period.

Gross margin (gross profit as a percentage of net sales) increased to 57.5 percent in the second quarter from 56.3 percent a year ago. Aaron said this was the result of diminishing product cost pressure and price increases taken earlier in the year. This help lead to a “better-than-expected” improvement in operating margin.

“We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin,” added Michael J. Kowalski, Tiffany chairman and CEO.

Sales by region are as follows:

* In the Americas, total sales increased 2 percent to $444 million in the second quarter. Comparable store sales were unchanged in the quarter, led by growth in Tiffany’s New York flagship store sales. Aaron noted that sales in the US were lower than expected and were mixed throughout the country with no discernible pattern.

* Total sales in the Asia-Pacific region rose 20 percent to $208 million in the second quarter. On a constant-exchange-rate basis, total sales also rose 20 percent and comparable store sales increased 13 percent, “led by especially strong sales growth in Greater China,” the company said in its report.

* Aaron focused a great deal of time on Japan where the company operates 54 stores. The negative translation effect from a substantially weaker yen caused total sales to decline 14 percent to $136 million in the second quarter. However, he noted that on a constant-exchange-rate basis, total sales increased 7 percent in the second quarter, due to comparable store sales growth of 8 percent with strong growth in engagement and higher-end jewelry categories.

* Total sales in Europe rose 11 percent to $111 million in the second quarter. On a constant-exchange-rate basis, total sales rose 10 percent and comparable store sales rose 7 percent due to sales growth in the United Kingdom and most of continental Europe.

* Sales classified as “Other” sales increased 33 percent to $26 million in the second quarter, primarily reflecting the conversion in July 2012 of five Tiffany & Co. stores in the United Arab Emirates from independently-operated to company-operated. The company said it expected to increase its presence in the Middle East.

Tiffany opened three stores in the second quarter, including its ninth in Hong Kong store. Other openings were in, in Verona, Italy and in Villahermosa, Mexico. The company closed a store in Tokyo, due to the mall the store was in closing for long-term renovations, Aaron said.

The company in the second quarter operated 277 stores (116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and five in the U.A.E.), versus 260 stores (106 in the Americas, 61 in Asia-Pacific, 55 in Japan and 33 in Europe and five in the U.A.E.) a year ago.

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Pandora Produces Charming Q3 Sales and Profit Gains

Danish jewelry company Pandora said Tuesday that third quarter revenue increased 14.3 percent, year-over-year, to DKK 1.79 billion ($308 million) with double-digit gains across all geographical markets. Net profit for the period increased by 11.4 percent to DKK 380 million ($65.2 million).

This is a strong turnaround when compared with second quarter results in which the company—best known for the manufacture, distribution and marketing of silver charm jewelry—said its sales fell by 9.5 percent to 1.26 billion DKK ($210.2 million) with profit during the same period down 89.9 percent to 63 million DKK ($10.5 million).

Pandora also said Tuesday that its stock balancing plan (replacing discontinued stock) is continuing as planned. In the third quarter, the company received returns of discontinued products with a wholesale value of DKK 86 million ($14.7 million), and replaced it with merchandising costing DKK 127 million ($21.8 million). In 2012 Pandora received returns of discontinued products valued at DKK 609 million ($104.6 million), and replaced DKK 599 million ($102.8 million).

Revenue by geographic region is as follows:

• Americas increased by 21.9 percent (9.5 percent in local currency), with U.S. sales up 15.8 percent (2.6 percent in local currency).
• Europe increased by 13.1 percent (11 percent in local currency).
• Asia Pacific decreased by 10.7 percent (17.3 percent in local currency).

Branded revenue as percentage of total revenue increased to 81.3 percent, compared with 73.6 percent in third quarter of 2011. Gross margin was 64.1 percent, compared with 73.6 percent in the third quarter of 2011.

EBITDA margin was 28 percent, compared with 34.2 percent in Q3 2011, a decrease of 6.2 percent to DKK 503 million ($86.3 million). EBIT margin was 25.8 percent compared with 32.2 percent in Q3 2011, an 8.5 percent drop to DKK 463 million ($79.5 million).

The company, which sells its jewelry through retail jewelers and its own branded retail stores, updated its outlook, saying it expects revenue for 2012 to be above DKK 6.3 billion ($1.08 billion), from its previous guidance above DKK 6 billion.

“I am happy to report that we continue to perform in line with our ‘18 months turn-around plan,’” said Björn Gulden, Pandora CEO. “Third quarter developed even a little better than we expected and we have, based on the tailwind from the currency development, decided to slightly upgrade our revenue guidance. One of our major initiatives ‘The stock balancing campaign’ was continued, mainly impacting the U.S. and third-party distribution, during Q3 2012. We have now largely concluded the campaign and it will, as communicated earlier, be finished by end of 2012.”

Gulden added its spring merchandise sold well and its fall merchandise had a strong start for the third quarter.

“The year is not yet finished,” he said. “We have our most important quarter to come, but we feel confident that our improved product, our lower prices and our other operational improvements will put us in the position of achieving our updated financial goals for the full year.”

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Signet Sales and Same Store Sales Up Nearly 11%

Kay Jewelers is a top performer for Signet.

Signet Jewelers Ltd., the world’s largest specialty retailer of fine jewelry, said Tuesday that third quarter sales increased 10.7 percent, year-over-year, to $710.5 million, led by a 10.6 percent increase in same store sales. Income before taxes for the period, ended October 29, was $42.1 million, up from $12 million for the third quarter of the prior year.

“Our sustained positive performance is due to the excellent execution of our strategies by our team,’ said Mike Barnes, CEO of the Bermuda-based company, which is listed on the NYST. “We are pleased with the start of the fourth quarter, and with the majority of our sales ahead of us.”

The company, which operates approximately 1,860 retail jewelry stores in the U.S. and U.K., was led by the strength of U.S. operations, while its U.K. business sales were slightly down or flat, year-over-year.

The company’s U.S. division, which consists of about 1,324 stores and accounts for about 80 of annual sales, reported a 13.3 percent increase in sales for the quarter to $563 million. Same store sales increased by 13.9 percent compared to a rise of 9.7 percent for the same period of the prior year.

Its Kay brand reported a 13.8 percent increase in sales for the period to $314.3 million while same store sales rose by 13 percent.

Its higher end Jared brand reported an 18.4 increase in sales to $194.6 million with an 18.3 percent increase in same store sales. Jared average unit selling price and same store sales were favorably impacted by approximately $76 and 8.3 percent, respectively, as a result of a one-time watch promotion.

The company also operates several regional brands in the U.S., which in total reported a loss of 3.9 percent to $54.1 million. Same store sales increased 4.3 percent for the period.

Signet’s U.K. division, which consists of about 536 stores and accounts for about 20 percent of annual sales, reported a 1.9 percent increase in sales to $147.5 million. At constant exchange rates, sales were down 1.2 percent. Same store sales were down 0.5 percent, compared to a decline of 0.6 percent in the third quarter of Fiscal 2011.

Its H.Samuel brand reported a 3 percent increase in sales (0.2 percent at constant exchange rates) to 78.3 million for the period. Same store sales were flat.

Its Ernest Jones brand reported a loss of 0.6 percent (down 2.4 percent at constant exchange rates) to $69.2 million. Same store sales were down 1.1 percent for the period.

Tiffany Still Riding High, Reports Strong Growth in all Regions, Raises Earnings Forecast

Tiffany & Co. said Friday that worldwide net sales in the second quarter increased 30 percent year-over-year to $872.7 million due to strong growth in all geographic regions. Excluding the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales increased 24 percent and comparable store sales rose 22 percent.

The luxury retail jeweler said net earnings increased 33 percent for the period ended July 31 to $90 million and, excluding nonrecurring charges, rose 58 percent in the quarter. Management increased its earnings forecast for fiscal 2011 to reflect the better-than-expected second quarter results.

“We are extremely pleased by these results which confirm the growing global appeal of Tiffany's product offerings,” said Michael J. Kowalski, Tiffany chairman and CEO. “In addition, we have been able to absorb precious metal and gemstone cost increases while improving our gross and operating margins.”

Net sales by region:

* In the Americas, second quarter sales rose 25 percent to $438.2 million, Tiffany said. On a constant-exchange-rate basis, total sales rose 24 percent and same store sales increased 23 percent. Sales in the New York flagship store increased 41 percent in the second quarter due to strong foreign tourist demand. Same store sales in the Americas increased 19 percent and Internet and catalog sales in the Americas increased 16 percent.

* In Asia-Pacific, second quarter sales increased 55 percent to $173.2 million in the second quarter. On a constant-exchange-rate basis, sales increased 45 percent same store sales increased 41 percent, due to growth in most countries with the largest increase in the greater China region.

* In Japan, second quarter sales rose 21 percent to $142.5 million. On a constant-exchange-rate basis, total sales increased 8 percent due to same store sales growth of 8 percent.

* In Europe, sales increased 32 percent to $101.3 million in the second quarter. On a constant-exchange-rate basis, sales increased 17 percent and same store sales rose 11 percent, reflecting growth in most countries.

* Other sales rose 46 percent to $17.4 million in the second quarter, due to increased wholesale sales of finished products to independent distributors within emerging markets, partly offset in the first half by a decline in wholesale sales of rough diamonds.

Other financial highlights in the second quarter:

* Gross margin (gross profit as a percentage of net sales) was 59 percent, compared with 57.8 percent for the same period of the prior year. The increases were due to sales leverage on fixed costs.

* SG&A (selling, general and administrative) expenses rose 37 percent in the second quarter, which included nonrecurring costs of $34 million in the second quarter, versus $4 million in both of the prior-year periods, related to the relocation of Tiffany's New York headquarters staff to 200 Fifth Avenue. Excluding the nonrecurring costs, SG&A expenses rose 26 percent for the period, reflecting higher store occupancy, staffing, marketing and sales-related variable costs.

* The effective income tax rate was 31.2 percent in the quarter versus 34 percent for the same period last year, with the decline primarily due to a reversal of a valuation allowance against certain deferred tax assets.

* At July 31, 2011, cash and cash equivalents and short-term investments totaled $565.2 million versus $614.7 million last year. Total short-term and long-term debt represented 29% of stockholders' equity compared with 40% a year ago.

* Net inventories at July 31 were 18 percent above the prior year. The increase was planned to support sales growth, store openings, product introductions and expanded assortments, and higher product and raw material acquisition costs. Almost one-fourth of the increase resulted from the effect of translating stronger foreign currencies into U.S. dollars.

* Tiffany said it repurchased approximately 330,000 shares of its common stock in the second quarter at a total cost of $24.5 million, or an average cost of $74.29 per share. In the first half, it spent $52.5 million to repurchase approximately 783,000 shares at an average cost of $67.00 per share. At July 31, approximately $340 million remained available for future repurchases under the currently authorized plan, which expires January 2013.

In its outlook, Tiffany said it is increasing its full year earnings forecast to $3.65 - $3.75 per diluted share (not including nonrecurring expenses) from the previous forecast of $3.45 - $3.55 per diluted share due to the better-than-expected second quarter results.

“Despite continuing economic uncertainty, our strong first half performance gives us ample reason to remain confident about our prospects for the balance of the year,” Kowalski said. “We are encouraged that total worldwide sales growth in the third quarter-to-date is continuing to exceed our expectations due to noteworthy strength in the Americas, Asia-Pacific and Japan, demonstrating, once again, the attraction of the Tiffany & Co. brand.”

Tiffany operates 236 stores (98 in the Americas, 55 in Japan, 52 in Asia-Pacific and 31 in Europe), versus 223 a year ago (91 in the Americas, 57 in Japan, 48 in Asia-Pacific and 27 in Europe).

Warren Buffett is the Star Jewelry Salesman at Borsheims

Susan Jacques, Borsheims president and CEO, shows Warren Buffett the special shareholder price on a piece of jewelry. Photo credit: Borsheims

Borsheims said it had record sales during its annual discount period for Berkshire Hathaway shareholders partly because Warren Buffett served a stint as a salesman for the Omaha, Neb.-based luxury retail jeweler.

The weeklong discount period for shareholders who attended the annual Berkshire Hathaway annual shareholders meeting in Omaha, held this past weekend, resulted in a 45 percent sales increase over the same period last year, Borsheims said on its website.

Borsheims, one of the nation’s largest independent jewelry stores, is owned by Berkshire Hathaway, where Buffett is chairman. On Sunday May 1, Buffett took a turn as a salesman for an hour and it was apparently quite successful.

Jewelry is Making a Comeback this Holiday Season

Jewelry has returned to many holiday wish lists, a sign that discretionary spending is back in vogue this holiday season, according to a just released survey.

A total of 23 percent of people surveyed will be asking for jewelry this holiday season, a 10 percent jump from last year’s 20.8 percent, according to the National Retail Federation’s 2010 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch.

Gift cards will remain the most requested holiday gift this year with 57 percent of people asking for plastic, followed by clothing (48.2%) and books (47.3%).

Overall, U.S. consumers plan to spend an average of $688.87 on holiday-related shopping, a slight rise from last year’s $681.83, according to the annual survey.

As in years past, most holiday gift-givers will spend the largest portion of their budget buying gifts for family ($393.55) and friends ($71.45), though they’ll still carve out room in their budget for small tokens of appreciation for both co-workers ($18.26) and others ($34.82). Total spending on gifts ($518.08) is expected to rise 2.1 percent from last year, which is in line with NRF says. Americans will also spend an average of $41.51 on decorations, $26.10 on greeting cards and postage, $86.32 on candy and food, and $16.86 on flowers.

“Consumers will still shop with the economy in the back of their minds, but we’re starting to see shoppers take baby steps toward a new normal,” said, Matthew Shay, NRF president and CEO. “As Americans open up their wallets for more discretionary gifts like jewelry or take advantage of sales to buy for themselves, retailers will begin to truly believe that the worst may be behind them.”

According to the survey, 61.7 percent of shoppers say the economy will impact their spending, down from last year’s 65.3 percent. Many shoppers say they will compensate by spending less (81.5%), comparison shopping online (30.9%) or with newspapers and circulars (28.1%), shopping for sales (54.1%) or using more coupons (40.6%). Although the economy continues to impact shoppers, a number of survey results indicate that shoppers may be ready to emerge from their shells this holiday season.

When asked which factor will be most important when shopping this holiday season, the majority of shoppers said that sales or price discounts (41.8%) or everyday low prices (12.7%) were most important. While those factors either declined or remained flat this year, two other categories rose in importance. The number of people who counted customer service as the most important factor rose from 4.4 percent last year to 5.3 percent this year, while shoppers who touted quality as the overriding factor rose from 11.8 percent to 12.7 percent.

“Price is paramount during any recession, but when the economy begins to recover other factors take on greater importance,” said Phil Rist, executive vice president, Strategic Initiatives, BIGresearch. “When shoppers consider other factors like customer service and quality in buying decisions, retailers have the ability to highlight a variety of other features to help their company stand out from the competition.”

Another sign that shoppers feel a bit of breathing room in their budget, the number of persons who say they will make a holiday purchase from a discounter dropped from 70.1 percent last year to 65.1 percent this year. Popular holiday shopping destinations will include department stores (54.5%), grocery stores (46.7%), the Internet (43.9%) and clothing stores (33.6%).

Americans aren’t only shifting where they’re shopping—how they’re shopping is changing, too. Mobile devices like iPhones and Androids are becoming more popular among consumers, and many shoppers plan to use these devices this holiday season to look for gift ideas, compare prices and find items in nearby stores. According to the survey, more than quarter of adults with a smartphone will use these devices to research or make holiday purchases, and that number jumps to 45 percent among young adults 18-24. Retailers are expected to take advantage of this trend by offering more robust mobile apps and Web sites, along with enhanced features like mobile reviews, to cater to Americans looking to shop from their phones.

Yet another hopeful indicator: the number of people who plan to take advantage of holiday sales to make non-gift purchases for themselves will rise 8 percent this year (52.9% in ’09 to 57.1% this year), with the average holiday shopper spending $107.50 on themselves, up from $101.37 last year.

Though the holiday season won’t kick off for many retailers until at least November 1, a sizeable number of shoppers are already planning ahead. According to the survey, 37.2 percent of Americans will begin holiday shopping by Halloween. Women are the most likely to begin shopping by the end of October (42.1%) while young adults 18-24 are among the least likely (27.7%).

NRF expects holiday sales to rise 2.3 percent to $447.1 billion.