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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COMPARABLE STORE SALES UP 5% IN U.S. AND 10% INTERNATIONALLY
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New York, N.Y., August 31, 2006 - Tiffany & Co. (NYSE: TIF) today reported
results for its fiscal second quarter ended July 31, 2006. Net sales growth of
9% was driven by increases in U.S. and international comparable store sales. As
expected, net earnings declined primarily due to a prior-year tax benefit.
In the second quarter, net sales increased 9% to $574,940,000, compared with
$526,701,000 in the prior year. 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 increased 10% and
worldwide comparable store sales rose 6%.
Net earnings in the second quarter were $41,144,000, or $0.29 per diluted share,
compared with $50,551,000, or $0.35 per diluted share. Earnings in the prior
year included a tax benefit of $6,600,000, or $0.05 per diluted share, related
to the repatriation provisions of the American Jobs Creation Act of 2004
("AJCA"). Earnings before income taxes declined 4%.
In the six-month period (first half) ended July 31, 2006, net sales of
$1,114,181,000 were 7% higher than $1,036,602,000 a year ago. On a
constant-exchange-rate basis, net sales increased 9% and worldwide comparable
store sales rose 5%.
First half net earnings of $84,286,000, or $0.59 per diluted share, compared
with $90,609,000, or $0.62 per diluted share, in the prior year. Earnings in the
prior year included AJCA tax benefits of $8,100,000, or $0.06 per diluted share.
Earnings before income taxes increased 4%.
Sales by channel of distribution were as follows:
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o U.S. Retail sales increased 8% to $288,556,000 in the second quarter
and 5% to $549,136,000 in the first half. Comparable store sales
increased 5% in the quarter but declined in July (quarterly sales rose
5% in the New York flagship store and 4% in branch stores) and rose 2%
in the first half (New York flagship store sales declined 1% and
branch store sales rose 2%). Comparable store sales growth in
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the quarter resulted from higher spending per transaction. The Company
operated 60 TIFFANY & CO. stores in the U.S. at the end of the
quarter.
o International Retail sales increased 10% to $223,153,000 in the second
quarter and 12% to $438,317,000 in the first half. On a
constant-exchange-rate basis, sales rose 12% in the quarter and 16% in
the first half due to 6% and 11% total retail sales growth in Japan
and solid growth in most other countries; on that same basis,
comparable international store sales increased 10% in the quarter and
13% in the first half, due to growth of: 2% in the quarter (but a
decline in July) and 7% in the half in Japan; 27% and 24% in the
Asia-Pacific region outside Japan; and 17% and 20% in Europe. The
Company operated 97 TIFFANY & CO. international stores and boutiques
at the end of the quarter.
o Direct Marketing sales increased 18% to $35,742,000 in the second
quarter and 11% to $65,699,000 in the first half. The increases in
both periods were due to growth in the number of orders and in the
average amount spent per order.
o Other sales in the second quarter increased 4% to $27,489,000 and
sales of $61,029,000 in the first half were equal to the prior year.
LITTLE SWITZERLAND sales rose 10% and 3% in the respective periods.
The Company continues to expand its IRIDESSE stores, which focus on
pearl jewelry.
Other financial highlights were as follows:
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o Gross profit as a percentage of net sales ("gross margin") was 55.1%
in the second quarter versus 55.5% in the prior year due to increased
product costs. Gross margin was 55.5% in the first half versus 54.7% a
year ago due to a favorable shift in product sales mix, partly offset
by increased product costs. The Company recorded LIFO inventory
charges of $8,101,000 in the second quarter (versus $2,952,000 a year
ago) and $9,467,000 in the first half (versus $4,169,000 in the prior
year).
o Selling, general and administrative ("SG&A") expenses rose 12% in the
second quarter and 10% in the first half. As a percentage of net
sales, SG&A expenses were 42.5% in the quarter (versus 41.4% a year
ago) and 42.3% in the half (versus 41.1% in the prior year), with the
increases largely reflecting higher store-related costs, as well as
higher marketing-related costs in the first half.
o Effective tax rates were 38.9% in the second quarter and 38.7% in the
first half, compared with 28.0% and 31.5% in the prior year. The lower
rates in the prior-year periods reflected the previously-mentioned
AJCA tax benefits.
o Net inventories at July 31, 2006 increased 16% from a year ago. This
increase reflected inventories purchased or manufactured in
anticipation of new store openings and expanded product assortments,
higher precious metal costs and expanded internal manufacturing and
diamond sourcing.
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o The Company repurchased and retired 2,525,135 shares of its Common
Stock in the second quarter at a total cost of $83,839,000, or an
average cost of $33.20 per share. In the first half, the Company
repurchased and retired 4,704,407 shares of its Common Stock at a
total cost of $163,589,000, or an average cost of $34.77 per share. In
a separate announcement today, the Company reported that its Board of
Directors has extended the expiration date of its current repurchase
program and authorized up to an additional $700 million for
repurchases. Including this additional authorization, there is
approximately $813 million available for future repurchases through
December 2009.
o At July 31, 2006, the Company's balance sheet included: cash and cash
equivalents of $146,941,000 (versus $128,611,000 a year ago),
short-term and long-term debt totaling $572,306,000 (versus
$404,263,000 a year ago) and stockholders' equity of $1,760,551,000
(versus $1,693,975,000 a year ago). Total debt as a percentage of
stockholders' equity was 33% at July 31, 2006 (versus 24% a year ago).
Michael J. Kowalski, chairman and chief executive officer, said, "We anticipated
these first half results due to above-average expense growth, but they do not
reflect Tiffany's historical performance or earnings power. Our ongoing plans
for store openings and new product introductions sustain our confidence in
Tiffany's ability to achieve higher rates of growth over the long-term."
He added, "Comparable store sales in August-to-date include a return to
mid-single-digit growth in the U.S., double-digit growth in many international
markets and a high-single-digit decline in Japan. For this third quarter, we are
looking for a mid-single-digit increase in earnings before income taxes, and net
earnings approximately equal to last year's 16 cents per diluted share which had
benefited from a lower effective tax rate due to favorable reserve adjustments
related to the expiration of certain statutory periods."
"Our expectation for the full year calls for a low-double-digit increase in
earnings before income taxes for 2006 and net earnings in a range of $1.77 -
$1.82 per diluted share. This projection assumes: high-single-digit net sales
growth, including mid-single-digit comparable store sales growth in the U.S. and
low-single-digit growth in Japan along with greater increases in other
international regions; gross margin approximately equal to the prior-year; and
high-single-digit SG&A expense growth," Mr. Kowalski said.
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 third quarter results on November 29, 2006
with a conference call at 8:30 a.m. (EST) that day, to be broadcast at
www.tiffany.com and
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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
- -----------------
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 believes this constant-exchange-rate measure 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 sales percentage increases (decreases), versus
the prior year, from the GAAP to the non-GAAP basis:
Second Quarter 2006 vs. 2005 First Half 2006 vs. 2005
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Trans- Constant- Trans- Constant-
GAAP lation Exchange- GAAP lation Exchange-
Reported Effect Rate Basis Reported Effect Rate Basis
-------------- ------------- --------------- -------------- ----------- ---------------
Net Sales:
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Worldwide 9% (1%) 10% 7% (2%) 9%
U.S. Retail 8% - 8% 5% - 5%
Internatinal
Retail 10% (2%) 12% 12% (4%) 16%
Japan Retail 1% (5%) 6% 3% (8%) 11%
Other Asia-
Pacific 23% 2% 21% 21% - 21%
Europe 19% 3% 16% 18% (3%) 21%
Comparable Store Sales:
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Worldwide 6% - 6% 4% (1%) 5%
U.S. Retail 5% - 5% 2% - 2%
International
Retail 8% (2%) 10% 8% (5%) 13%
Japan Retail (3%) (5%) 2% (1%) (8%) 7%
Other Asia-
Pacific 28% 1% 27% 24% - 24%
Europe 20% 3% 17% 17% (3%) 20%
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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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2006 2005 2006 2005
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Net sales $ 574,940 $ 526,701 $ 1,114,181 $ 1,036,602
Cost of sales 257,962 234,617 496,077 469,697
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Gross profit 316,978 292,084 618,104 566,905
Selling, general and administrative expenses 244,342 218,016 471,221 426,526
-------------- -------------- -------------- ---------------
Earnings from operations 72,636 74,068 146,883 140,379
Other expenses, net 5,307 3,858 9,282 8,064
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Earnings before income taxes 67,329 70,210 137,601 132,315
Provision for income taxes 26,185 19,659 53,315 41,706
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Net earnings $ 41,144 $ 50,551 $ 84,286 $ 90,609
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Net earnings per share:
Basic $ 0.30 $ 0.35 $ 0.60 $ 0.63
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Diluted $ 0.29 $ 0.35 $ 0.59 $ 0.62
============== ============== ============== ===============
Weighted-average number of common shares:
Basic 139,170 142,989 140,556 143,618
Diluted 141,177 144,930 142,896 145,533
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
July 31, January 31, July 31,
2006 2006 2005
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ASSETS
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Current assets:
Cash and cash equivalents $ 146,941 $ 393,609 $ 128,611
Accounts receivable, net 143,446 142,294 126,000
Inventories, net 1,236,995 1,060,164 1,066,371
Deferred income taxes 80,404 69,576 72,084
Prepaid expenses and other current assets 62,410 33,200 51,991
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Total current assets 1,670,196 1,698,843 1,445,057
Property, plant and equipment, net 904,479 866,004 916,374
Other assets, net 212,351 212,425 139,237
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$ 2,787,026 $ 2,777,272 $ 2,500,668
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Short-term borrowings $ 142,215 $ 38,942 $ 22,966
Current portion of long-term debt 6,272 6,186 -
Accounts payable and accrued liabilities 199,301 202,646 178,322
Income taxes payable 31,467 60,364 20,510
Merchandise and other customer credits 57,577 56,472 51,491
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Total current liabilities 436,832 364,610 273,289
Long-term debt 423,819 426,548 381,297
Postretirement/employment benefit obligations 42,876 41,982 40,778
Deferred income taxes 935 - 9,790
Other long-term liabilities 122,013 113,219 101,539
Stockholders' equity 1,760,551 1,830,913 1,693,975
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$ 2,787,026 $ 2,777,272 $ 2,500,668
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