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 FIRST QUARTER RESULTS;
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SALES AND EARNINGS EXCEED EXPECTATIONS
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New York, N.Y., May 13, 2005 - Tiffany & Co. (NYSE: TIF) today reported a 12%
first quarter increase in net sales, led by 11% growth in U.S. comparable store
sales. Net earnings rose 9% in the quarter, despite weak sales in Japan and a
lower gross margin that reflected shifts in sales mix and higher product costs.
In the three months (first quarter) ended April 30, 2005, net sales rose 12% to
$509,901,000, compared with $456,960,000 a year ago. On a constant-exchange-rate
basis that excludes the translation effect from a weaker U.S. dollar, net sales
rose 11% and worldwide comparable store sales rose 4% (see attached "Non-GAAP
Measures").
Net earnings in the first quarter increased 9% to $40,058,000, or 27 cents per
diluted share, from $36,811,000, or 25 cents per diluted share.
Michael J. Kowalski, chairman and chief executive officer, said, "We are very
pleased with the robust growth in our U.S. sales, which compared with a very
strong quarter last year, as well as growth in many international markets. We
believe this clearly signifies the enduring appeal of our classic products and
demand for our latest introductions, as well as the favorable response to our
new CELEBRATION rings campaign. Sales in Japan remained below our expectations,
but we will continue to focus our managerial, marketing and merchandising
resources on that market."
Sales in Tiffany's channels of distribution were as follows:
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o U.S. Retail sales increased 14% to $243,411,000 in the first quarter.
Growth was primarily generated by an increase in the amount spent per
transaction, as well as by a higher number of transactions. Comparable
store sales rose 11%, due to growth of 11% in the New York flagship
store and a geographically broad-based 11% increase in branch stores.
The success of new stores opened in the past year also contributed to
overall sales growth.
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o International Retail sales of $190,316,000 in the first quarter were
3% higher than the prior year. On a constant-exchange-rate basis,
International Retail sales rose 1% but comparable store sales declined
6%; on that basis, comparable store sales declined 10% in Japan (total
retail sales declined 5%), increased 5% in the Asia-Pacific region
outside Japan and declined 3% in Europe.
o Direct Marketing sales in the first quarter rose 12% to $41,377,000.
Combined Internet and catalog sales rose 14% and business gift sales
increased 9% due to increases both in the number of orders and in the
amount spent per order.
o Other sales rose 61% to $34,797,000. The increase was partly due to
18% sales growth in LITTLE SWITZERLAND stores. In addition,
approximately two-thirds of the increase was attributable to the sale
of rough diamonds determined, in the normal course of business, to be
unsuitable for Tiffany's production (such sales commenced in the third
quarter of 2004 and will continue on a regular basis as a component of
the Company's direct diamond sourcing initiatives). Other sales also
benefited modestly from growth of TEMPLE ST. CLAIR jewelry sales and
from two IRIDESSE stores, which opened last fall and focus exclusively
on the pearl jewelry category.
Other Financial Highlights:
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o Gross margin was 53.9% in the first quarter, versus 56.7% in the prior
year. The decline was largely due to changes in geographic and product
sales mix, as well as higher product costs. In addition, the Company
recorded a LIFO inventory charge of $1,218,000 in this quarter,
compared with a charge of $3,574,000 in 2004's first quarter. In the
final week of the quarter, the Company increased certain U.S. retail
prices to offset higher product costs.
o Selling, general and administrative ("SG&A") expenses increased 6% in
the first quarter. SG&A expenses as a percentage of net sales were
40.9% in the first quarter, versus 42.9% in the prior year. Sales
growth was sufficient to leverage fixed SG&A expenses.
o The effective tax rate was 35.5% in the first quarter, versus 38.0% in
the prior year. The decrease was due to an additional tax-benefit of
$1,500,000, or $0.01 per diluted share, which was related to the
repatriation provisions of the American Jobs Creation Act of 2004.
o Net inventories at April 30, 2005 were 11% higher than at April 30,
2004. Combined raw material and work-in-process inventories rose 5%
due to expanded
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rough diamond sourcing and increased costs of raw materials. Finished
goods inventories rose 14% to support broadened product offerings and
new stores.
o During the first quarter, the Company spent $33,978,000 to repurchase
and retire 1,036,792 shares of its Common Stock, at an average cost of
$32.77 per share.
o The Company is in a strong financial position. At April 30, 2005, cash
and cash equivalents were $213,708,000 (versus $190,793,000 a year
ago), total debt was $439,666,000 (versus $528,698,000 a year ago) and
stockholders' equity was $1,710,532,000 (versus $1,496,950,000 a year
ago). Total debt as a percentage of stockholder's equity was 26% at
April 30, 2005, compared with 35% a year ago.
Mr. Kowalski continued, "We are justifiably enthusiastic about
Tiffany's growth potential in the U.S. and in many international
markets. We are more cautious about Japan, but continue to address
weakness in that market with product development initiatives and
focused marketing."
He added, "We have a very strong line-up of new product introductions
this year and exciting plans for new store openings, all supported by
compelling marketing and public relations programs. Our full-year
objective calls for an 8-10% net sales increase, including annual
comparable store sales growth in a mid-to-high single-digit range in
the U.S. and in a low-single-digit range in yen in Japan; the opening
of four Company-operated TIFFANY & CO. stores in the U.S. and at least
four internationally; and the opening of additional LITTLE SWITZERLAND
and IRIDESSE stores. Also for the full year, we now expect a modest
year-over-year decline in gross margin as well as a low-to-mid
single-digit increase in SG&A expenses; and other expenses, net of
approximately $20 million. We also expect an effective tax rate of
approximately 38% for the remaining quarters of the year. And we
continue to expect mid-single-digit percentage growth in net
inventories for the full year."
Mr. Kowalski concluded, "Therefore, we are maintaining our expectation
for net earnings to be comfortably in a range of $1.45-$1.55 per
diluted share for 2005; however, earnings could be at the lower end of
that range if full year comparable store sales in Japan were to
decline by a single-digit percentage."
Conference Call
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The Company will host a conference call today at 8:30 a.m. (EST) to review its
results and 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.
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Next Scheduled Announcement
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In order for the Company to more closely align the public reporting of its
quarterly financial results with the filing of its Report on Form 10-Q,
investors and analysts should note that the Company anticipates reporting its
second quarter results on August 31, 2005 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").
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. The Company operates 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 Other operations include consolidated results from ventures operated
under trademarks or trade names other than TIFFANY & CO. For additional
information, please visit www.tiffany.com or call our shareholder information
line at 800-TIF-0110.
This document contains certain "forward-looking" statements concerning the
Company's objectives and expectations with respect to sales, store openings,
gross margins, expenses, earnings and inventories. Actual results might differ
materially from those projected in the forward-looking statements. Information
concerning risk factors that could cause actual results to differ materially is
set forth in the Company's 2004 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
NON-GAAP MEASURES
The Company reports information in accordance with U.S. Generally Accepted
Accounting Principles ("GAAP"). Internally, management monitors the sales
performance of its international subsidiaries on a non-GAAP basis that excludes,
from GAAP reported sales, the positive or negative effects that result from
translating sales of its international subsidiaries into U.S. dollars
(constant-exchange-rate basis). Management uses this constant-exchange-rate
measure because it believes it is a more representative assessment of the sales
performance of its international subsidiaries and provides better comparability
between reporting periods.
The Company's management does not, nor does it suggest that investors should,
consider such non-GAAP financial measures in isolation from, or as a substitute
for, financial information prepared in accordance with GAAP. The Company
presents such non-GAAP financial measures in reporting its financial results to
provide investors with an additional tool to evaluate the Company's operating
results.
The following tables reconcile net sales percentage increases (decreases)
measured and reported in accordance with GAAP to the non-GAAP
constant-exchange-rate basis:
Three Months Ended April 30, 2005
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Constant-
GAAP Translation Exchange-Rate
Net Sales: Reported Effect Basis
---------- -------- ------ -----
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Worldwide 12% 1% 11%
U.S. Retail 14% - 14%
International Retail 3% 2% 1%
Japan (3%) 2% (5%)
Other Asia-Pacific 18% 4% 14%
Europe 10% 4% 6%
Three Months Ended April 30, 2005
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Constant-
Comparable GAAP Translation Exchange-Rate
Store Sales: Reported Effect Basis
------------ -------- ------ -----
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Worldwide 5% 1% 4%
U.S. Retail 11% - 11%
International Retail (3%) 3% (6%)
Japan (8%) 2% (10%)
Other Asia-Pacific 9% 4% 5%
Europe 2% 5% (3%)
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)
Three Months
Ended April 30,
-----------------------------------
2005 2004
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Net sales $ 509,901 $ 456,960
Cost of sales 235,080 198,084
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Gross profit 274,821 258,876
Selling, general and administrative expenses 208,510 196,181
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Earnings from operations 66,311 62,695
Other expenses, net 4,206 3,324
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Earnings before income taxes 62,105 59,371
Provision for income taxes 22,047 22,560
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Net earnings $ 40,058 $ 36,811
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Net earnings per share:
Basic $ 0.28 $ 0.25
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Diluted $ 0.27 $ 0.25
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Weighted-average number of common shares:
Basic 144,248 146,815
Diluted 146,285 149,289
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
April 30, January 31, April 30,
2005 2005 2004
------------------ ------------------ ------------------
ASSETS
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Current assets:
Cash and cash equivalents $ 213,708 $ 187,681 $ 190,793
Short-term investments - 139,200 -
Accounts receivable, net 120,713 133,545 115,512
Inventories, net 1,073,605 1,057,245 964,954
Deferred income taxes 69,385 64,790 48,624
Prepaid expenses and other current assets 41,119 25,428 40,410
-------------- -------------- --------------
Total current assets 1,518,530 1,607,889 1,360,293
Property, plant and equipment, net 917,415 917,853 879,105
Other assets, net 140,512 140,376 180,360
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$ 2,576,457 $ 2,666,118 $ 2,419,758
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Short-term borrowings $ 47,488 $ 42,957 $ 95,842
Current portion of long-term debt - - 49,973
Accounts payable and accrued liabilities 177,514 186,013 185,594
Income taxes payable 35,137 118,536 26,544
Merchandise and other customer credits 52,084 52,315 46,413
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Total current liabilities 312,223 399,821 404,366
Long-term debt 392,178 397,606 382,883
Postretirement/employment benefit obligations 40,449 40,220 37,287
Deferred income taxes 21,666 33,175 18,516
Other long-term liabilities 99,409 94,136 79,756
Stockholders' equity 1,710,532 1,701,160 1,496,950
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$ 2,576,457 $ 2,666,118 $ 2,419,758
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