Exhibit 99.1
TIFFANY & CO.
NEWS RELEASE
Fifth Avenue & 57th Street Contacts:
New York, N.Y. 10022 ---------
James N. Fernandez
(212) 230-5315
Mark L. Aaron
(212) 230-5301
TIFFANY REPORTS THIRD QUARTER RESULTS;
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COMPARABLE U.S. STORE SALES INCREASE 16%;
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COMPANY UPDATES ITS BUSINESS OUTLOOK
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NEW YORK, November 13, 2003 - Tiffany & Co. (NYSE-TIF) today reported 18% growth
in its worldwide net sales in the third quarter ended October 31, 2003. Net
earnings were 20% lower than the prior year, due to a prior-year tax benefit.
In the third quarter, net sales rose 18% to $430,123,000, versus $366,033,000 in
the prior year, due to geographically broad-based sales growth in most of
Tiffany's domestic and international markets. Worldwide, on a
constant-exchange-rate basis that excludes the effect of translating
local-currency-denominated sales into U.S. dollars, net sales increased 15% and
comparable store sales rose 10%.
Net earnings in the third quarter declined 20% to $28,031,000, or 19 cents per
diluted share, compared with $35,184,000, or 24 cents per diluted share, in
2002. The decline in net earnings resulted from a non-recurring tax benefit of
$8,015,000, or 5 cents per diluted share, in the third quarter of 2002 (see
"Other Financial Highlights").
For the nine-month period (year-to-date) ended October 31, 2003, net sales
increased 17% to $1,268,457,000, versus $1,087,589,000. On a
constant-exchange-rate basis, net sales rose 14% and comparable worldwide store
sales rose 6%. Net earnings increased 4% to $105,041,000, or 71 cents per
diluted share, compared with $100,607,000, or 68 cents per diluted share.
Michael J. Kowalski, chairman and chief executive officer, said, "We are
delighted with the dramatically improving sales trends we've seen in the U.S.
this year, characterized by extraordinary growth in diamond jewelry sales, as
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well as strength in a number of international markets. And we are excited with
the continued exceptional results in our e-commerce business. However, our
business in Japan has performed below our expectations, largely due to
especially weak sales of silver jewelry, although we believe product
introductions will contribute to improved trends."
Sales performance in Tiffany's four channels of distribution was as follows:
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o U.S. Retail sales in the third quarter rose 20% to $202,844,000 and
year-to-date sales rose 13% to $589,466,000. On a comparable store
basis, sales in the quarter rose 16% (up 16% in branch stores and 15%
in Tiffany's New York flagship store) and in the year-to-date rose 9%
(up 10% in branch stores and 4% in the flagship store). Comparable
store sales growth in the quarter and year-to-date was generated by an
increased average transaction amount and an increased number of
transactions. Year-to-date, the Company has opened a new store in
Coral Gables, Florida and new stores in Walnut Creek and Palm Desert,
California, and converted a wholesale-trade location in Guam to a
company-operated TIFFANY & CO. store.
o International Retail sales increased 11% to $173,533,000 in the third
quarter and 12% to $508,044,000 in the year-to-date. On a
constant-exchange-rate basis, total International Retail sales
increased 5% in the third quarter and 6% in the year-to-date; on that
basis, comparable retail store sales in Japan declined 3% and 1%
(total retail sales in Japan increased fractionally and 3%), in other
Asia-Pacific markets rose 25% and 10% and in Europe rose 10% and 11%.
Year-to-date, the Company has opened two department store retail
locations and relocated an older one in Japan, and opened retail
locations in Korea, Mexico and Brazil. In the fourth quarter, the
Company expects to open an additional retail location in Japan.
o Direct Marketing sales in the third quarter rose 5% to $39,311,000 and
year-to-date sales rose 10% to $120,537,000. Combined Internet/catalog
sales increased 23% in the quarter and 22% in the year-to-date due to
continued strength in e-commerce sales. Business sales declined 19% in
the quarter and 6% in the year-to-date, reflecting the Company's
previously-announced decision to leave the market for employee service
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award programs. The Company will continue to offer a range of business
gifts, event-related trophies and other awards.
o Specialty Retail sales were $14,435,000 in the third quarter and
$50,410,000 in the year-to-date. In both the prior year's quarter and
year-to-date, sales were $3,921,000, which is not fully comparative
due to the consolidated net sales of Little Switzerland, Inc. which
the Company acquired in October 2002.
Other Financial Highlights:
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o Gross margin (gross profit as a percentage of net sales) was 55.3% in
the third quarter versus 59.0% a year ago. The decline was due to: the
consolidation of Little Switzerland, Inc.; the opening of an
additional distribution center during the third quarter; changes in
sales mix toward higher-priced, lower-margin diamond jewelry as the
retail selling environment improved; and a LIFO inventory charge of
$3,500,000 in the third quarter versus a LIFO inventory credit of
$500,000 a year ago primarily due to higher precious metal costs. In
the year-to-date, gross margin was 56.9% versus 59.0% a year ago.
o The expense ratio (selling, general and administrative expenses as a
percentage of net sales) of 43.8% in the quarter and 43.0% in the
year-to-date was lower than the prior year due to favorable leverage
on fixed costs from the sales growth.
o The non-recurring tax benefit recorded in the third quarter of 2002
involved the recognition of the cumulative U.S. tax benefit provided
by the Extraterritorial Income Exclusion Act.
o The Company's financial position remains strong. Net-debt leverage was
23% at October 31, 2003, compared with 22% a year ago. In 2003's
second quarter, the Company's Japanese subsidiary purchased the land
and building housing its flagship store in Tokyo's famous Ginza
shopping district. The purchase price was approximately $140 million
plus transaction fees. The Company completed a long-term financing of
that purchase in the third quarter.
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o Net inventories at October 31, 2003 were 15% higher than a year ago.
Approximately one-third of the increase was due to the translation
effect from a weaker U.S. dollar, with the remainder due to expanded
manufacturing operations, the opening of new stores and the
introduction of new products.
o The Company did not repurchase any shares of its Common Stock in the
third quarter and $16.5 million remains available for repurchases
under a Board-authorized plan which expires this month.
Outlook
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Mr. Kowalski added, "Tiffany's overall success so far this year, complemented by
generally improving external conditions, lead us to believe that we can achieve
earnings of $1.35 - $1.40 per diluted share for fiscal 2003, versus our previous
expectation of $1.33-$1.38."
Specific expectations for the fourth quarter include:
o a low-double-digit percentage increase in net sales (assumes
comparable store sales increasing by low-double-digits in the U.S. and
low-single-digits in Japan);
o a slight year-over-year decline in gross margin;
o a mid-teens percentage increase in SG&A, which reflects store
openings, business development, advertising, depreciation and
insurance;
o "other expenses, net" of approximately $4-5 million;
o an effective tax rate of approximately 37%; and
o net earnings of 64-69 cents per diluted share.
Mr. Kowalski added, "Tiffany will continue its pursuit of healthy and
sustainable organic growth through new store openings, product introductions and
enhanced customer awareness of high-quality, emotionally resonant products to
celebrate life's important occasions. Similarly, we will also pursue further
development of our Specialty Retail channel. In fact, we plan to launch a new
non-TIFFANY & CO. retail concept in 2004, which will capitalize on the
underserved and competitively fragmented market for pearl jewelry. Looking to
the future, the entire Tiffany organization is very well-positioned to create
additional and lasting shareholder value," he concluded.
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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.tiffany.com (click on "About Tiffany," "Shareholder
Information," "Conference Call") and at 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 operated or to be
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.
The Company anticipates reporting its holiday sales results on January 8, 2004
and conducting a conference call at 8:30 a.m. (EST) that day, to be broadcast at
www.tiffany.com and www.streetevents.com. To receive future notifications for
conference calls and/or news release alerts, interested parties may register at
www.tiffany.com (click on "About Tiffany," "Shareholder Information," "Calendar
of Events" and "News by E-Mail").
This press release contains certain "forward-looking" statements concerning
expectations for sales, store openings, 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 2002 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 Nine months
ended October 31, ended October 31,
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2003 2002 2003 2002
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Net sales $ 430,123 $ 366,033 $ 1,268,457 $ 1,087,589
Cost of sales 192,402 150,220 546,120 445,554
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Gross profit 237,721 215,813 722,337 642,035
Selling, general and administrative expenses 188,506 165,900 545,700 474,478
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Earnings from operations 49,215 49,913 176,637 167,557
Other expenses, net 4,933 5,446 10,696 14,052
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Earnings before income taxes 44,282 44,467 165,941 153,505
Provision for income taxes 16,251 9,283 60,900 52,898
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Net earnings $ 28,031 $ 35,184 $ 105,041 $ 100,607
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Net earnings per share:
Basic $ 0.19 $ 0.24 $ 0.72 $ 0.69
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Diluted $ 0.19 $ 0.24 $ 0.71 $ 0.68
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Weighted average number of common shares:
Basic 146,047 145,137 145,412 145,450
Diluted 149,079 148,066 148,024 149,046
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
October 31, January 31, October 31,
2003 2003 2002
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ASSETS
Current assets:
Cash and cash equivalents $ 152,724 $ 156,197 $ 90,646
Accounts receivable, net 115,411 113,061 96,112
Inventories, net 897,482 732,088 777,932
Deferred income taxes 44,503 44,380 48,660
Prepaid expenses and other current assets 43,840 24,662 39,519
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Total current assets 1,253,960 1,070,388 1,052,869
Property, plant and equipment, net 877,205 677,630 650,499
Deferred income taxes 1,967 6,595 6,377
Other assets, net 158,854 168,973 159,177
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$ 2,291,986 $ 1,923,586 $ 1,868,922
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 128,202 $ 52,552 $ 58,268
Current portion of long-term debt 50,573 - 51,500
Accounts payable and accrued liabilities 199,756 163,338 182,123
Income taxes payable 952 41,297 485
Merchandise and other customer credits 44,867 42,720 39,520
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Total current liabilities 424,350 299,907 331,896
Long-term debt 386,677 297,107 295,947
Postretirement/employment benefit obligations 36,803 33,117 33,999
Other long-term liabilities 97,508 85,406 81,905
Stockholders' equity 1,346,648 1,208,049 1,125,175
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$ 2,291,986 $ 1,923,586 $ 1,868,922
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Certain reclassifications were made to the prior period's condensed consolidated balance sheet.
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