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
-------------------------------------
New York, N.Y., November 29, 2006 - Tiffany & Co. (NYSE: TIF) today reported its
results for the third quarter ended October 31, 2006. Net sales increased 10%
due to growth in the U.S. and most international markets. Net earnings rose 23%.
In the third quarter, net sales increased 10% to $547,786,000. On a
constant-exchange-rate basis which excludes the effect of translating
foreign-currency-denominated sales into U.S. dollars (see attached "Non-GAAP
Measures" schedule), net sales rose 10% and worldwide comparable store sales
rose 4%.
Net earnings in the third quarter increased 23% to $29,142,000, or $0.21 per
diluted share. Third quarter earnings included gains associated with the sale of
investments (see "Other Expenses, Net"), as well as favorable tax reserve
adjustments.
In the nine-month (year-to-date) period ended October 31, 2006, net sales rose
8% to $1,661,967,000. On a constant-exchange-rate basis, net sales increased 9%
and worldwide comparable store sales rose 5%.
Net earnings of $113,428,000 in the year-to-date were 1% below the prior year.
Net earnings per diluted share of $0.80 were slightly above $0.79 in the prior
year, primarily due to increased share repurchases. Earnings in the prior year
included tax benefits of $8,100,000, or $0.06 per diluted share, related to the
repatriation provisions of the American Jobs Creation Act of 2004 ("AJCA").
Sales by channel of distribution were as follows:
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o U.S. Retail sales increased 9% to $270,373,000 in the third quarter
and comparable store sales rose 6% (sales rose 13% in the New York
flagship store and 4% in comparable branch stores). In the
year-to-date, U.S. Retail sales increased 6% to $819,509,000 and
comparable store sales rose 3% (sales rose 4% in the New York flagship
store and 3% in comparable branch stores). Comparable store sales
growth in both periods was due to higher spending per transaction.
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o International Retail sales rose 9% to $221,681,000 in the third
quarter and 11% to $659,998,000 in the year-to-date. On a
constant-exchange-rate basis, sales increased 9% in the quarter and
14% in the year-to-date, and comparable store sales rose 4% and 10%,
respectively, as strong growth in many international markets more than
compensated for weaker results in Japan. Detailed sales results by
geographical region are noted on the attached "Non-GAAP Measures"
schedule.
o At the end of the third quarter, the Company operated 164 TIFFANY &
CO. stores and boutiques (compared with 152 a year ago), including 63
in the U.S. and 101 internationally.
o Direct Marketing sales increased 11% to $30,308,000 in the third
quarter and 11% to $96,007,000 in the year-to-date. In both periods,
sales growth was generated by increases in the number of orders and in
the amounts spent per order.
o Other sales rose 23% to $25,424,000 in the third quarter and 5% to
$86,453,000 in the year-to-date. The majority of the third quarter
increase resulted from increased wholesale sales of diamonds. In
addition, LITTLE SWITZERLAND sales rose 9% and 4%, respectively, which
continued to be below the Company's expectations. The opening of new
IRIDESSE stores also contributed to growth.
Other financial highlights were as follows:
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o Gross margin (gross profit as a percentage of net sales) in the third
quarter was 53.6% (versus 54.1% a year ago) and in the year-to-date
was 54.8% (versus 54.5% a year ago). The decrease in the quarter was
due to wholesale sales of diamonds and higher product costs, partly
offset by sales leverage on fixed costs. Included in the higher
product costs were LIFO inventory charges of $10,444,000 in the third
quarter and $19,911,000 in the year-to-date, versus $4,178,000 and
$8,347,000 in the respective prior-year periods.
o Selling, general and administrative ("SG&A") expenses rose 8% in the
third quarter and 10% in the year-to-date. As expected, the majority
of the increases were due to higher store- and marketing-related
costs. As a percentage of net sales, SG&A expenses in the third
quarter and year-to-date were 45.5% (versus 46.1% a year ago) and
43.4% (versus 42.8% a year ago). SG&A expenses in 2005's third quarter
had included charges of $4,316,000 for business dispositions.
o Other expenses, net in the third quarter and year-to-date included
income of $5,185,000 associated with the sale of equity investments in
an on-line retailer and a manufacturer; both of these investments had
been written-off in previous years. Other expenses, net in the third
quarter also included a $1,589,000 gain on the disposition of
marketable securities.
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o The Company's effective tax rate was 35.6% in the third quarter and
38.0% in the year-to-date, versus 33.0% and 31.8% in the respective
prior-year periods. The lower rate in 2005's year-to-date reflected
tax benefits of $8,100,000, or $0.06 per diluted share, from the AJCA.
In addition, the Company recorded favorable reserve adjustments
relating to the expiration of certain statutory periods in both
third-quarter periods.
o Net inventories at October 31, 2006 were 19% higher than a year ago,
due to new store openings, broadened product assortments and higher
precious metal costs. This increase was also attributable to expanded
internal manufacturing and diamond sourcing operations.
o The Company repurchased and retired 3,008,200 shares of its Common
Stock in the third quarter at a total cost of $100,525,000, or an
average cost of $33.42 per share. In the year-to-date, the Company
repurchased and retired 7,712,607 shares of its Common Stock at a
total cost of $264,115,000, or an average cost of $34.24 per share.
There is approximately $712 million available for future repurchases
through December 2009 under the currently authorized program.
o At October 31, 2006, total debt as a percentage of stockholders'
equity rose to 39%, compared with 24% a year ago, reflecting
borrowings for share repurchases and higher inventory levels.
Michael J. Kowalski, chairman and chief executive officer, said, "We are pleased
with these overall results. We are now almost one-month into the
November-December holiday period and have seen net sales growth higher than we
expected. Comparable store sales growth in the U.S. is currently exceeding our
high-single-digit expectation and international comp store sales growth is
exceeding our mid-single digit expectation. It's a good start to the season, but
the vast majority of holiday business is still ahead of us."
He added, "We are modestly increasing our full year 2006 net earnings
expectation to a range of $1.79-$1.84 per diluted share. For the full year, we
are assuming the following: net sales growth of approximately 10%; gross margin
slightly lower than the prior year; high-single-digit SG&A expense growth; an
effective tax rate of approximately 37%; and a low-double-digit increase in net
inventories. Customers are enthusiastic about the new stores we have opened this
year and the extraordinary products we have introduced. We believe Tiffany & Co.
is well-positioned."
Today's Conference Call
- -----------------------
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.
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Next Scheduled Announcement
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The Company anticipates reporting its November-December holiday sales results on
January 10, 2007 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
- -------------------
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:
Third Quarter 2006 vs. 2005 Year-to-Date 2006 vs. 2005
-------------------------------------------- ------------------------------------------
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 10% - 10% 8% (1%) 9%
U.S. Retail 9% - 9% 6% - 6%
International
Retail 9% - 9% 11% (3%) 14%
Japan Retail (8%) (5%) (3%) (1%) (7%) 6%
Other Asia-
Pacific 24% 2% 22% 22% 1% 21%
Europe 32% 7% 25% 23% - 23%
Comparable Store Sales:
- -----------------------
Worldwide 4% - 4% 4% (1%) 5%
U.S. Retail 6% - 6% 3% - 3%
International
Retail 3% (1%) 4% 6% (4%) 10%
Japan Retail (9%) (4%) (5%) (4%) (7%) 3%
Other Asia-
Pacific 19% 2% 17% 22% 1% 21%
Europe 27% 6% 21% 20% - 20%
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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,
----------------------------------- -------------------------------------
2006 2005 2006 2005
-------------- -------------- -------------- ---------------
Net sales $ 547,786 $ 500,105 $ 1,661,967 $ 1,536,707
Cost of sales 254,311 229,575 750,388 699,272
-------------- -------------- -------------- ---------------
Gross profit 293,475 270,530 911,579 837,435
Selling, general and administrative expenses 249,419 230,735 720,640 657,261
-------------- -------------- -------------- ---------------
Earnings from operations 44,056 39,795 190,939 180,174
Other (income) expenses, net (1,225) 4,289 8,057 12,353
-------------- -------------- -------------- ---------------
Earnings before income taxes 45,281 35,506 182,882 167,821
Provision for income taxes 16,139 11,717 69,454 53,423
-------------- -------------- -------------- ---------------
Net earnings $ 29,142 $ 23,789 $ 113,428 $ 114,398
============== ============== ============== ===============
Net earnings per share:
Basic $ 0.21 $ 0.17 $ 0.81 $ 0.80
============== ============== ============== ===============
Diluted $ 0.21 $ 0.16 $ 0.80 $ 0.79
============== ============== ============== ===============
Weighted-average number of common shares:
Basic 136,753 142,280 139,288 143,172
Diluted 138,872 144,993 141,647 145,472
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TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
October 31, January 31, October 31,
2006 2006 2005
----------------- ----------------- ------------------
ASSETS
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Current assets:
Cash and cash equivalents $ 58,185 $ 393,609 $ 111,586
Accounts receivable, net 150,067 142,294 129,454
Inventories, net 1,309,466 1,060,164 1,104,326
Deferred income taxes 78,727 69,576 74,544
Prepaid expenses and other current assets 70,977 33,200 73,801
------------- ------------- --------------
Total current assets 1,667,422 1,698,843 1,493,711
Property, plant and equipment, net 926,989 866,004 860,712
Other assets, net 215,608 212,425 145,523
------------- ------------- --------------
$ 2,810,019 $ 2,777,272 $ 2,499,946
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term borrowings $ 237,447 $ 38,942 $ 30,365
Current portion of long-term debt 6,259 6,186 -
Accounts payable and accrued liabilities 223,377 202,646 182,831
Income taxes payable 9,754 60,364 15,460
Merchandise and other customer credits 58,722 56,472 54,238
------------- ------------- --------------
Total current liabilities 535,559 364,610 282,894
Long-term debt 416,863 426,548 373,606
Postretirement/employment benefit obligations 43,323 41,982 41,106
Deferred income taxes 1,072 - -
Other long-term liabilities 126,532 113,219 109,693
Stockholders' equity 1,686,670 1,830,913 1,692,647
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$ 2,810,019 $ 2,777,272 $ 2,499,946
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