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'S FIRST QUARTER NET EARNINGS RISE 8%;
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EARNINGS INCREASE TO 30 CENTS PER DILUTED SHARE;
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SALES GROWTH DRIVEN BY STRONG INTERNATIONAL RESULTS
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New York, N.Y., May 31, 2006 - Tiffany & Co. (NYSE: TIF) today reported
increases in net sales and net earnings for the fiscal quarter ended April 30,
2006. Results benefited from international sales growth and a higher gross
margin.
Net sales of $539,241,000 were 6% higher than $509,901,000 in the first quarter
of 2005. On a constant-exchange-rate basis which excludes the effects of
translating foreign-currency-denominated sales into U.S. dollars (see attached
"Non-GAAP Measures" schedule), net sales rose 9% and worldwide comparable store
sales increased 5%.
Net earnings increased 8% to $43,142,000, or $0.30 per diluted share, from
$40,058,000, or $0.27 per diluted share. Earnings in the first quarter of 2005
included a tax benefit of $1,500,000, or $0.01 per diluted share, related to the
repatriation provisions of the American Jobs Creation Act of 2004. Earnings
before income taxes increased 13%.
Sales by channel of distribution were as follows:
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o U.S. Retail sales increased 2% to $260,580,000 and comparable store sales
declined 1%. Comparable branch store sales were equal to the prior year and
sales in the New York flagship store declined 7%.
o International Retail sales, in U.S. dollars, increased 13% to $215,164,000.
On a constant-exchange-rate basis, sales rose 21% due to 15% total retail
sales growth in Japan and increases in other regions; on that same basis,
comparable international store sales rose 16% due to increases of 12% in
Japan, 20% in the Asia-Pacific region outside Japan and 24% in Europe.
o Direct Marketing sales rose 4% to $29,957,000 due to increases both in the
number of orders shipped and the average order size.
o Other sales declined 4% to $33,540,000.
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Michael J. Kowalski, chairman and chief executive officer, said, "We are very
pleased with the geographically broad-based strength in our international stores
and are encouraged with Tiffany's results in Japan. U.S. Retail sales results
were disappointing, but it should be viewed relative to a strong 14% increase in
last year's first quarter."
Other Financial Highlights:
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o Gross profit as a percentage of net sales ("gross margin") was 55.8% in the
first quarter, compared with 53.9% in the prior year. The increased margin
primarily reflected favorable product sales mix, as well as some benefit
from geographical sales mix. Sharply higher precious metal and diamond
costs continue to pressure gross margin, although the Company periodically
adjusts retail prices to mitigate such effects. The Company recorded a LIFO
inventory charge of $1,366,000 in the first quarter, versus a charge of
$1,218,000 in the prior year, due to increased inventory costs during the
period.
o Selling, general and administrative ("SG&A") expenses increased 9% in the
quarter. As a percentage of net sales, SG&A expenses were 42.1% versus
40.9% in the prior year. Sales growth was insufficient to offset increased
marketing spending and to leverage fixed costs.
o The effective tax rate was 38.6% in the first quarter compared with 35.5% a
year ago. The rate in 2005 included a $1,500,000, or $0.01 per diluted
share, benefit related to the repatriation provisions of the American Jobs
Creation Act of 2004.
o Net inventories at April 30, 2006 were 6% above the prior year. The
increase reflects inventories to support new stores, new product
introductions and internal manufacturing, as well as lower-than-expected
growth in U.S. Retail sales.
o The Company repurchased and retired 2,179,272 shares of its Common Stock in
the first quarter at a total cost of $79,750,000, or an average cost of
$36.59 per share. Approximately $196 million remains available for future
repurchases under the plan authorized by our Board of Directors.
o The Company's balance sheet is strong. At April 30, 2006, cash and cash
equivalents and short-term investments were $226,716,000 (versus
$213,708,000 a year ago), short-term and long-term debt totaled
$482,420,000 (versus $439,666,000 a year ago) and stockholders' equity was
$1,803,748,000 (versus $1,710,532,000 a year ago). Total debt as a
percentage of stockholders' equity was 27% at April 30, 2006 (versus 26% a
year ago).
Mr. Kowalski continued, "Tiffany has exciting initiatives underway in 2006. We
are expanding our presence this year with five new U.S. stores and new locations
in Japan (two), China (three), Austria, Mexico and Canada. We are also
maintaining an active pace of new product introductions, highlighted by the
recent launch of jewelry designed by the renowned architect Frank Gehry."
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He added, "For the full year, we are expecting sales growth of almost 10%. Our
forecast assumes gradually improving trends in the U.S. and solid international
sales growth so that we achieve mid-single-digit comparable store sales growth
in the U.S. and Japan for the full year. Continued increases in precious metal
costs will likely have some adverse effect on gross margins, but we expect full
year gross margin to approximate the prior year. We will continue to manage SG&A
expenses prudently and remain focused on effective asset use. Therefore, we
continue to expect at least 12% growth in earnings before income taxes for 2006,
with virtually all of the year-over-year growth concentrated in the second half
of the year, and net earnings in a range of $1.77 - $1.82 per diluted share."
Today's 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. Investors may listen to the call at www.tiffany.com
(click on "About Tiffany," "Shareholder Information," "Conference Call") and
www.streetevents.com.
Next Scheduled Announcement
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The Company anticipates reporting its second quarter results on August 31, 2006
with 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, please 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. 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. Other operations include
consolidated results from ventures operated under trademarks or tradenames 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, earnings per share and assets. 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 2005 Annual Report on Form 10-K and in
other 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
(Unaudited)
NON-GAAP MEASURES
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The Company reports information in accordance with U.S. Generally Accepted
Accounting Principles ("GAAP"). Internally, management monitors the sales
performance of its international stores and boutiques on a non-GAAP basis that
eliminates the positive or negative effects that result from translating
international sales 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
stores and boutiques 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),
versus the prior year, from the GAAP to the non-GAAP basis:
Three Months Ended
April 30, 2006
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Constant-
GAAP Translation Exchange-Rate
Reported Effect Basis
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Net Sales:
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Worldwide 6% (3%) 9%
U.S. Retail 2% - 2%
International Retail 13% (8%) 21%
Japan Retail 4% (11%) 15%
Other Asia-Pacific 19% (1%) 20%
Europe 18% (9%) 27%
Comparable Store Sales:
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Worldwide 2% (3%) 5%
U.S. Retail (1%) - (1%)
International Retail 8% (8%) 16%
Japan Retail 1% (11%) 12%
Other Asia-Pacific 20% - 20%
Europe 14% (10%) 24%
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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,
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2006 2005
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Net sales $ 539,241 $ 509,901
Cost of sales 238,115 235,080
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Gross profit 301,126 274,821
Selling, general and administrative expenses 226,879 208,510
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Earnings from operations 74,247 66,311
Other expenses, net 3,975 4,206
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Earnings before income taxes 70,272 62,105
Provision for income taxes 27,130 22,047
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Net earnings $ 43,142 $ 40,058
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Net earnings per share:
Basic $ 0.30 $ 0.28
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Diluted $ 0.30 $ 0.27
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Weighted-average number of common shares:
Basic 141,941 144,248
Diluted 144,367 146,285
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
April 30, January 31, April 30,
2006 2006 2005
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ASSETS
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Current assets:
Cash and cash equivalents $ 180,541 $ 393,609 $ 213,708
Short-term investments 46,175 - -
Accounts receivable, net 156,124 142,294 120,713
Inventories, net 1,140,829 1,060,164 1,073,605
Deferred income taxes 73,501 69,576 69,385
Prepaid expenses and other current assets 54,180 33,200 41,119
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Total current assets 1,651,350 1,698,843 1,518,530
Property, plant and equipment, net 888,221 866,004 917,415
Other assets, net 212,280 212,425 140,512
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$ 2,751,851 $ 2,777,272 $ 2,576,457
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Short-term borrowings $ 47,726 $ 38,942 $ 47,488
Current portion of long-term debt 6,244 6,186 -
Accounts payable and accrued liabilities 210,215 202,646 177,514
Income taxes payable 38,040 60,364 35,137
Merchandise and other customer credits 55,614 56,472 52,084
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Total current liabilities 357,839 364,610 312,223
Long-term debt 428,450 426,548 392,178
Postretirement/employment benefit obligations 42,429 41,982 40,449
Deferred income taxes 797 - 21,666
Other long-term liabilities 118,588 113,219 99,409
Stockholders' equity 1,803,748 1,830,913 1,710,532
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$ 2,751,851 $ 2,777,272 $ 2,576,457
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