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 SECOND QUARTER RESULTS;
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COMPANY PROVIDES BUSINESS OUTLOOK
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New York, NY, August 12, 2004 -- Tiffany & Co. (NYSE:TIF) today reported an 11%
decline in net earnings and a net sales increase of 8% for the second quarter
ended July 31, 2004. A 10% increase in U.S. comparable store sales was
broad-based across most locations but not sufficient to offset a sales decline
in Japan and a lower consolidated gross margin.
In the three months (second quarter) ended July 31, 2004, net sales rose 8% to
$476,597,000 versus $442,495,000 a year ago. Worldwide comparable store sales
rose 7%. Both net sales and comparable store sales growth benefited by 2% from
the translation-related effect of a weaker U.S. dollar. Net earnings were
$36,616,000, or 25 cents per diluted share, compared with $41,147,000, or 28
cents per diluted share, in the prior year.
In the six-month (first half) period ended July 31, 2004, net sales of
$933,557,000 were 11% higher than $838,334,000 in the first half of 2003.
Worldwide comparable store sales rose 10%. Both net sales and comparable store
sales growth included a 3% translation-related benefit. Net earnings were
$76,924,000, or 52 cents per diluted share, versus $77,010,000, or 52 cents per
diluted share, in the prior-year period.
Sales performance in Tiffany's four channels of distribution was as follows:
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o U.S. Retail sales rose 11% to $236,770,000 in the second quarter
largely due to comparable store sales growth of 10% (consisting of a
16% increase in New York flagship store sales and 9% growth in
comparable branch store sales). In the first half, U.S. Retail sales
increased 17% to $450,432,000 with comparable store sales increasing
14% (due to increases of 22% for New York flagship store sales and
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13% for comparable branch store sales). The growth in comparable store
sales resulted from an increase in the average amount spent per
transaction. During the quarter, the Company opened stores in Palm
Beach Gardens, Florida and in Edina, Minnesota and currently operates
53 TIFFANY & CO. stores in the U.S.
o International Retail sales increased 7% to $180,948,000 in the second
quarter and comparable store sales increased 2% (both of which
included a translation-related benefit of 6%). In the first half,
International Retail sales rose 9% to $365,679,000 and comparable
store sales rose 5%, both of which included a translation-related
benefit of 8%. Sales by major region were as follows: in Japan, total
retail sales declined 3% in the second quarter and comparable store
sales decreased 4% (both of which included a translation-related
benefit of 6%), and, in the first half, total retail sales declined 1%
and comparable store sales declined 2% (both of which included a
translation-related benefit of 8%). In other Asia-Pacific markets,
comparable store sales rose 19% in the quarter and 26% in the half
(including translation-related benefits of 3% and 5%). In Europe,
comparable store sales increased 9% in the quarter and 15% in the half
(including translation-related benefits of 9% and 12%). During the
quarter, the Company opened a store in Taipei; it now operates 92
TIFFANY & CO. stores and boutiques internationally.
o Direct Marketing sales declined 8% to $40,274,000 in the second
quarter and declined 5% to $77,173,000 in the first half. Combined
e-commerce and catalog sales rose 2% in the quarter and 7% in the
half, due to an increase in the average order size and a decline in
the number of orders. As expected, business sales declined, by 26% in
the second quarter and 25% in the first half, due to the
year-over-year effect of the Company's decision to discontinue service
award program sales during 2003.
o Specialty Retail sales increased 13% to $18,605,000 in the second
quarter and 12% to $40,273,000 in the first half, primarily due to
sales growth in LITTLE SWITZERLAND stores. This fall, the Company
plans to open two stores under the trade-name IRIDESSE, which will
focus exclusively on the pearl jewelry category.
Michael J. Kowalski, chairman and chief executive officer, said, "These second
quarter results reflect better-than-expected sales performance in Tiffany's U.S.
retail operations,
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while Direct Marketing sales were disappointing. As anticipated, Japan results
continued to suffer from weak silver jewelry sales. We are addressing that
category with new products and targeted marketing."
Other Financial Highlights
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o Gross margin (gross profit as a percentage of net sales) was 55.7% in
the second quarter and 56.2% in the first half, compared with 57.6%
and 57.8% in the prior-year periods. Almost half of the declines
resulted from LIFO and inventory-obsolescence charges of $6,900,000 in
the quarter and $12,000,000 in the half (versus $2,950,000 and
$5,500,000 a year ago). In addition, the declines in gross margin
resulted from changes in sales mix, the opening of an additional
distribution center in 2003's third quarter, expansion of internal
manufacturing and diamond sourcing and other factors, none of which
individually were significant.
o Selling, general and administrative ("SG&A") expenses rose 8% in the
second quarter and 10% in the first half. SG&A expenses as a
percentage of net sales were 42.3% in the quarter and 42.1% in the
half, compared with 42.2% and 42.6% in 2003.
o Tiffany's strong financial position at July 31, 2004 included cash and
cash equivalents of $153,623,000 (versus $116,119,000 a year ago),
short-term and long-term debt totaling $586,337,000 (versus
$475,843,000 a year ago) and stockholders' equity of $1,503,305,000
(versus $1,281,406,000 a year ago).
o Net inventories at July 31, 2004 were 27% higher than a year ago. The
increase was largely due to higher raw material and work-in-process
inventories to support expanded diamond sourcing and internal jewelry
manufacturing, as well as higher finished goods inventories for new
stores and new products. Three percent of the increase was due to the
translation effect of a weaker U.S. dollar.
o The Company repurchased and retired 625,000 shares of its Common Stock
at an average cost of $34.11 per share during the second quarter. In
the first half, the Company repurchased and retired 735,000 shares of
its Common Stock at an average cost of $34.62 per share. Approximately
$91 million remains available for future repurchases under the
currently authorized plan.
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Outlook
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Mr. Kowalski continued, "Our full year 2004 expectations now call for 10% net
sales growth and an increase in net earnings to approximately $1.55-$1.60 per
diluted share, versus $1.45 per diluted share in 2003. Some specific
expectations for the second half of the year include: net sales growth of
approximately 10% including high-single-digit comparable store sales growth in
the U.S. and comparable store sales (in local currency) in Japan declining in
the third quarter and increasing modestly in the fourth quarter; a slight
year-over-year increase in gross margin; SG&A expenses increasing by a low-teens
percentage in the third quarter and mid-single-digits in the fourth quarter;
other expenses of approximately $3 million in each quarter; and an effective tax
rate of 38%. As a result, we expect third quarter net earnings approximately
equal to the prior year, followed by double-digit earnings growth in the fourth
quarter."
He added, "We have been experiencing excellent initial results in new stores
opened over the past year. We expect to increase worldwide square footage of
TIFFANY & CO. stores by approximately 7% in 2004. This includes U.S. stores
already opened in Palm Beach Gardens, Florida and Edina, Minnesota and planned
openings in Kansas City, Missouri and Westport, Connecticut. Internationally, we
have already opened additional stores in London and Taiwan and plan to open two
new stores in Japan this fall in the Marunouchi area of Tokyo and the
Nishi-Umeda area of Osaka, with several store expansions also occurring in
2004."
Mr. Kowalski concluded, "Our Company's growth opportunities remain very
substantial, through Tiffany and through the specialty retail channel. With a
highly-developed infrastructure in place and the financial strength to support
that expansion, we are well positioned and excited about pursuing and continuing
to achieve long-term success."
Conference Call
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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.
Third Quarter Earnings Announcement
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Investors and analysts should note that the Company anticipates reporting its
third quarter results on November 11, 2004 and conducting a conference call at
8:30 a.m. (EST) that
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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").
Company Description
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Tiffany & Co. (NYSE: TIF) operates jewelry and specialty retail stores and
manufactures products through its subsidiary corporations. Its principal
subsidiary is Tiffany and Company ("Tiffany"). Founded in 1837, Tiffany now
operates more than 140 TIFFANY & CO. retail stores and boutiques in the
Americas, Asia-Pacific and Europe and engages in direct selling through
Internet, catalog and business gift operations. The Company's Specialty Retail
operations include consolidated results from retail ventures operated by
subsidiaries other than Tiffany under separate trademarks or trade names.
Worldwide sales were $2.0 billion in 2003. For additional information, please
visit www.tiffany.com or call our shareholder information line at 800-TIF-0110.
This press release contains certain "forward-looking" statements concerning
expectations for sales, store openings, gross margins, expenses 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 2003 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 Six Months
Ended July 31, Ended July 31,
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2004 2003 2004 2003
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Net sales $ 476,597 $ 442,495 $ 933,557 $ 838,334
Cost of sales 211,313 187,523 408,607 353,718
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Gross profit 265,284 254,972 524,950 484,616
Selling, general and administrative expenses 201,427 186,519 392,757 357,194
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Earnings from operations 63,857 68,453 132,193 127,422
Other expenses, net 4,798 3,450 8,122 5,763
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Earnings before income taxes 59,059 65,003 124,071 121,659
Provision for income taxes 22,443 23,856 47,147 44,649
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Net earnings $ 36,616 $ 41,147 $ 76,924 $ 77,010
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Net earnings per share:
Basic $ 0.25 $ 0.28 $ 0.52 $ 0.53
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Diluted $ 0.25 $ 0.28 $ 0.52 $ 0.52
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Weighted-average number of common shares:
Basic 146,370 145,294 146,593 145,094
Diluted 148,669 148,163 149,081 147,744
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
July 31, January 31, July 31,
2004 2004 2003
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ASSETS
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Current assets:
Cash and cash equivalents $ 153,623 $ 276,115 $ 116,119
Accounts receivable, net 114,596 131,990 104,949
Inventories, net 1,034,404 871,251 814,406
Deferred income taxes 48,161 45,043 44,185
Prepaid expenses and other current assets 50,029 23,683 35,705
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Total current assets 1,400,813 1,348,082 1,115,364
Property, plant and equipment, net 892,436 885,092 844,631
Deferred income taxes - - 7,895
Other assets, net 182,361 157,914 159,144
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$ 2,475,610 $ 2,391,088 $ 2,127,034
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Short-term borrowings $ 157,941 $ 41,948 $ 186,157
Current portion of long-term debt 49,033 51,920 -
Accounts payable and accrued liabilities 173,635 209,842 172,383
Income taxes payable 21,699 45,922 22,011
Merchandise and other customer credits 47,776 45,527 43,457
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Total current liabilities 450,084 395,159 424,008
Long-term debt 379,363 392,991 289,686
Postretirement/employment benefit obligations 37,917 36,746 35,574
Deferred income taxes 17,713 22,397 -
Other long-term liabilities 87,228 75,595 96,360
Stockholders' equity 1,503,305 1,468,200 1,281,406
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$ 2,475,610 $ 2,391,088 $ 2,127,034
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