Exhibit 99.1
TIFFANY & CO.
NEWS RELEASE
Contacts:
---------
Fifth Avenue & 57th Street James N. Fernandez
New York, N.Y. 10022 (212) 230-5315
Mark L. Aaron
(212) 230-5301
TIFFANY REPORTS FULL YEAR 2002 RESULTS;
SALES INCREASE 6% AND NET EARNINGS RISE 9%;
CONTINUED STRONG PROGRESS TOWARDS STRATEGIC OBJECTIVES
NEW YORK, February 26, 2003 - Tiffany & Co. (NYSE-TIF) today reported increases
in sales and earnings in its fourth quarter and full year ended January 31,
2003. Results were in line with the Company's expectations.
In the three months (fourth quarter) ended January 31, 2003, net sales rose 9%
to $619,013,000, compared with $565,759,000 a year ago. On a
constant-exchange-rate basis that excludes the effect of translating
local-currency-denominated sales into U.S. dollars, net sales rose 8% and
comparable worldwide store sales declined 1%. Net earnings increased 8% to
$89,287,000, or 60 cents per diluted share, compared with $82,745,000, or 55
cents per diluted share, a year ago. Net earnings in the prior year included an
impairment charge of three cents per diluted share related to Tiffany's
investment in a third-party Internet retailer.
For the year ended January 31, 2003, net sales of $1,706,602,000 were 6% higher
than $1,606,535,000 in the prior year. On a constant-exchange-rate basis, net
sales rose 6% and comparable worldwide sales declined 1%. Net earnings rose 9%
to $189,894,000, or $1.28 per diluted share, versus $173,587,000, or $1.15 per
diluted share, in the prior year. Net earnings in the year ended January 31,
2003 include the effect of a non-recurring tax benefit of five cents per share,
reflecting the recognition of the cumulative U.S. tax benefits as provided by
the Extraterritorial Income Exclusion Act provision of the Internal Revenue
code. The Company determined in the third quarter that this tax benefit was
applicable to its operations and, therefore, recognized a tax benefit in that
quarter. Excluding the non-recurring tax benefit, net earnings were $1.23 per
diluted share.
Michael J. Kowalski, chairman and chief executive officer, said, "Tiffany
enjoyed a year of modest sales and earnings growth in 2002 but, of greater
importance, made continued
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strong progress towards strategic objectives intended to create long-term value
for shareholders."
Sales in Tiffany's four channels of distribution were as follows:
o U.S. Retail sales increased 3% to $298,433,000 in the fourth quarter. U.S.
Retail sales rose 4% to $819,814,000 in the full year and represented 48%
of the Company's net sales. Tiffany's comparable store sales rose
fractionally in the fourth quarter and 2% for the year. Sales in Tiffany's
New York flagship store increased 1% in the fourth quarter and fractionally
for the year, while comparable U.S. branch store sales rose fractionally
and 2% in those respective periods. Comparable store sales in the quarter
and year primarily reflected an increased number of transactions. The
Company opened five stores in 2002, one of which replaced two hotel-based
retail locations that were closed.
o International Retail sales rose 8% to $231,108,000 in the fourth quarter
and rose 4% to $683,489,000 for the year, representing 40% of annual net
sales. On a constant-exchange-rate basis, sales increased 3% in both the
fourth quarter and the year; on that basis, comparable retail store sales
for those respective periods declined 10% and 8% in Japan (total retail
sales in Japan declined 3% and 1%), increased 13% and 6% in other
Asia-Pacific markets, and increased 9% and 2% in Europe. In 2002, the
Company opened two department-store retail locations and closed one in
Japan, and opened retail locations in Korea, Taiwan and Paris.
o Direct Marketing sales rose 13% to $69,270,000 in the fourth quarter and
increased 11% to $179,175,000 in the year, representing 11% of annual net
sales. In those respective periods, combined Internet/catalog sales
increased 21% and 24% due to continued strength in e-commerce sales, while
Business sales rose 1% and declined 3%.
o The Specialty Retail channel primarily reflects the consolidated net sales
of Little Switzerland, Inc. stores, which the Company acquired in October
2002. Sales were $20,202,000 in the fourth quarter and $24,124,000 for the
year, representing 1% of annual net sales.
In the fourth quarter and full year, gross margins (gross profit as a percentage
of net sales) were 59.7% and 59.3%, compared with 60.9% and 58.7% in the prior
year. Expense ratios (selling, general and administrative expenses (SG&A) as a
percentage of
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net sales) of 35.2% and 40.6% were higher than 34.6% and 39.4% in the prior
periods due to insufficient sales volume to offset SG&A increases and increases
in marketing expenses.
The Company concluded 2002 in a strong financial position. Net-debt leverage of
14% at January 31, 2003 compared with 9% a year ago. Accounts receivable of
$113,061,000 was 15% above the prior year. Net inventories of $732,088,000 were
20% above the prior year-end, partly due to the opening of new stores, the
introduction of new products, expanded manufacturing operations and the
translation effect of a weaker U.S. dollar, as well as the inclusion of Little
Switzerland's inventories.
The Company purchased and retired 400,000 shares of its Common Stock in the open
market during the fourth quarter at an average cost of $28.33 per share. The
Company purchased and retired 1,350,000 shares of its Common Stock in the open
market during the full year at an average cost of $27.80 per share. The Company
currently has $21 million available for future purchases under its authorized
plan.
Mr. Kowalski continued, "We are encouraged by Tiffany's ability to weather a
variety of difficult external conditions which, we believe, clearly exhibits the
appeal of Tiffany's extraordinary product offerings and the strength of our
management team. In 2002, we achieved our objectives for new store openings, new
product introductions, infrastructure development and disciplined expense
management, all of which make Tiffany well positioned to benefit when economic
conditions improve."
He added, "While it is difficult to precisely predict the timing of improved
consumer sentiment, Tiffany enjoys a wealth of organic and incremental growth
opportunities that we are actively pursuing. We fully intend to maintain our
normal pace of store expansion and product development in 2003 but, from a
financial perspective, we are taking a relatively cautious approach to planning
the beginning of the year. We are barely one month into the new fiscal year but
are experiencing a good start, including healthy Valentine's Day sales results.
Our expectations for 2003 include: (1) a low-teens percentage increase in net
sales (including mid-single-digit comparable store sales increases in the U.S.
and Japan) and 5% growth in retail store square footage; (2) a decline of less
than a full point in gross margin, as incremental infrastructure costs partly
related to a new distribution center and the annualized expenses of Little
Switzerland more than offset benefits from growth in internal manufacturing; (3)
a mid-teens percentage increase in SG&A, reflecting ongoing store expansion and
accelerating business development spending as well as higher advertising
spending, depreciation and
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insurance costs; (4) a mid-single-digit increase in operating earnings; (5) a
reduction in "other expenses, net" to approximately $10 million, partly
reflecting expected earnings from the Company's equity investment in Aber
Diamond Corporation; (6) a high-single-digit increase in earnings before income
taxes; (7) an effective tax rate of approximately 38%; and, as a result of the
above, (8) a mid-to-high single-digit increase in net earnings, or a range of
$1.33 - $1.38 per diluted share. Seasonally, we would expect net earnings growth
in all except the third quarter. On a year-over-year comparative basis, during
the third quarter, pre-tax earnings growth will be limited by increased costs
due to the startup and ongoing operation of our second distribution center, and
net earnings are expected to decline entirely due to a non-recurring tax benefit
in the third quarter of 2002. Overall, these expectations are similar to what we
expressed when we reported Tiffany's holiday sales results in January. Finally,
we expect to achieve healthy cash flow to support this growth and that, as a
result of the completion of some major projects, capital expenditures will
decelerate to approximately 8% of net sales. Difficult business conditions and
geo-political uncertainties could certainly impact the near-term confidence and
spending of consumers and affect retail sales. However, we will continue to
maintain our focus on longer-term opportunities to create lasting shareholder
value."
The Company will host a conference call today at 8:30 a.m. (EST) to review these
results and its outlook. Interested parties may listen to a broadcast on the
Internet at www.shareholder.com/tiffany and www.streetevents.com.
Tiffany & Co. is the internationally renowned jeweler and specialty retailer.
Sales are made primarily through company-operated TIFFANY & CO. stores and
boutiques in the Americas, Asia-Pacific and Europe. Direct Marketing includes
Tiffany's Business Sales division, Internet and catalog sales. Specialty Retail
primarily includes the retail sales made in Little Switzerland, Inc. stores and
also includes consolidated results from other ventures now or in the future
operated under non-TIFFANY & CO. trademarks or trade names. Additional
information can be found on Tiffany's Web site, www.tiffany.com, and on its
shareholder information line 800-TIF-0110.
This press release contains certain "forward-looking" statements concerning
expectations for sales, margins and earnings. Actual results might differ
materially from those projected in the forward-looking statements. Information
concerning factors that could cause actual results to differ materially are set
forth in Tiffany's 2001 Annual Report and in Form 10-K, 10-Q and 8-K Reports
filed with the Securities and Exchange Commission. The Company undertakes no
obligation to update or revise any forward-looking statements to reflect
subsequent events or circumstances.
# # #
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
Three months
ended January 31, Years ended January 31,
----------------------------------- -------------------------------------
2003 2002 2003 2002
------------- ------------- --------------- --------------
Net sales $ 619,013 $ 565,759 $ 1,706,602 $ 1,606,535
Cost of sales 249,600 221,132 695,154 663,058
------------- ------------- --------------- --------------
Gross profit 369,413 344,627 1,011,448 943,477
Selling, general and administrative expenses 217,773 195,662 692,251 633,580
------------- ------------- --------------- --------------
Earnings from operations 151,640 148,965 319,197 309,897
Other expenses, net 5,508 11,058 19,560 20,585
------------- ------------- --------------- --------------
Earnings before income taxes 146,132 137,907 299,637 289,312
Provision for income taxes 56,845 55,162 109,743 115,725
------------- ------------- --------------- --------------
Net earnings $ 89,287 $ 82,745 $ 189,894 $ 173,587
============= ============= =============== ==============
Net earnings per share:
Basic $ 0.62 $ 0.57 $ 1.31 $ 1.19
============= ============= =============== ==============
Diluted $ 0.60 $ 0.55 $ 1.28 $ 1.15
============= ============= =============== ==============
Weighted average number of common shares:
Basic 144,962 144,909 145,328 145,535
Diluted 147,804 149,688 148,591 150,517
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
January 31, January 31,
2003 2002
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 156,197 $ 173,675
Accounts receivable, net 113,061 98,527
Inventories, net 732,088 611,653
Deferred income taxes 44,380 41,170
Prepaid expenses and other current assets 24,662 28,032
-------------- --------------
Total current assets 1,070,388 953,057
Property, plant and equipment, net 677,630 525,585
Deferred income taxes 6,595 4,560
Other assets, net 168,973 147,872
-------------- --------------
$ 1,923,586 $ 1,631,074
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 52,552 $ 40,402
Current portion of long-term debt - 51,500
Accounts payable and accrued liabilities 163,338 134,694
Income taxes payable 41,297 48,997
Merchandise and other customer credits 42,720 38,755
-------------- --------------
Total current liabilities 299,907 314,348
Long-term debt 297,107 179,065
Postretirement/employment benefit obligations 33,117 29,999
Other long-term liabilities 85,406 70,717
Stockholders' equity 1,208,049 1,036,945
-------------- --------------
$ 1,923,586 $ 1,631,074
============== ==============
Certain reclassifications were made to the prior period's condensed consolidated balance sheet.
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