TIF - Earnings call transcript Q4 2018

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Operator

Good day, everyone, and welcome to this Tiffany & Company Fourth Quarter 2018 Conference Call. Today’s call is being recorded. Participating on today’s call is Mr. Mark Aaron, Vice President of Investor Relations; Mr. Mark Erceg, Tiffany’s Executive Vice President and Chief Financial Officer; and Mr. Executive Chief Tiffany’s Bogliolo, Officer. Alessandro I At call to the like to this Mr. time, over turn would Mark Aaron. Please ahead. go

Mark Aaron

Thank you. quarter at to Thank the XX-K. today’s results. results call. I you the the least filing everyone for today, with had report issued some joining of we hope our of Tiffany's on release you've review fourth news and annual year Earlier full and us Form on chance a

questions. some be your Following from pleased Mark, Alessandro will we comments and take

note made differ events by statements. or or statements as call the required are please or this obligation or continuing, forward-looking Before forward-looking regulation. Company The assumed by to applicable are these not that Actual law revise undertakes that on expected expressed statements planned, historical materially update in facts forward-looking results or might results no subsequent circumstances, implied any except statements. from reflect to

today uncertainties with as under differ news filings pleased the now well as call of cause to factors, GAAP concerning could filed actual Commission, forth the the that measures information referenced Exchange is over measures non-GAAP today https://investor.tiffany.com required Those on filed Alessandro. can Financial Securities to results Form X-K. found Tiffany's to Information. I'm as cover the Form this set be in release risks their Additional earlier website, the XX-K Tiffany's presentation comparable selecting well and as reconciliations and in materially by to turn of

Alessandro Bogliolo

then release, key in filing. Erceg -- And with what financial we they details of found be and pleased annual results a speaking, our results questions. our and I'm in everyone. priorities. and as of today's allow specific hello these for plenty Mark our results team global broad XXXX Tiffany's with to your and accomplished. XX-K and in I can will Broadly Mark, The address will time Thanks, pertain sense strategic news

and customers to rose sales foreign Europe, most in we year, Pacific, to attributed though the full categories. tourists and the And encouraged year Americas, Japan were volatile. local in product in Asia to were sales full the sales attributed For even increased higher experience

long-term As in year on us exactly spending one to first We increase well to then lot we in we factors the when the decelerated half year ago in external substantial that to growth half. XXXX. more And went But in focus our you is the growth. the progress past about as sustainable areas made the our talk presented benefited journey our in against can I in and that half. six investment know priorities productive second believe is it decision you started we sales to several us support happen going strategic to a as and second

our from on of media. have existing base, social January since Then customers from not they years. customers Tiffany former result, new customer we and at growth our came number have on #tiffanydiamond a sales was well starting a shopped at XXXX in brand campaigns. to came These highlighted evolve exciting surprise Tiffany. and that message to Believe was audience new Dreams Love, that and Our In Believe the the campaigns bold our believe as signaled pleasant something and messaging to brand strategy In amplify with I strengthened in XXXX, as campaign message that and happen as holiday in as who a diamonds,

superlative glamour Lady Diamond of the Oscars of traceability the diamonds of carat the country of diamonds. Tiffany or individually providing beauty, are Our a Gaga visibility assertion origin the Yellow our and with region legendary Tiffany leading synchronized the at to innovation of customers of XXX registered and our enormous

My in existing to pace at collections, offerings inventory to numerous Paper the Flowers significant unveiled introduced product our and a through renew to locations in of jewelry investment offer assortment line, we Make jewelry expensive is strategy a jewelry extensions Another faster around we It some made XXXX and customization program. powerful build the began our of the in Tiffany more world, key high a

the Tiffany in launched True limited a we XXXX, of the U.S., collection. assortment holiday For

We the boldly launch in solitaire styles excited with of and out the and now roll the are True increasing to all jewelry Tiffany new XXXX. throughout regions designed

a add key existing bold For store relocation century the We XXXX. stores, flagship openings Tiffany press market into stores customers, in US. will the and announced closing in XX for markets XXst stores our to with industry a world, the its cities. of next deliver store number course a size an the experience, increase retail location expanded of while six some important Pitt potential just presence we opening in beautiful for we we most our important grand relocating exciting the stylish experience stores. by experience. XXXX, the and And priority an high our to around the corner the and in of net in for imposing exciting York aesthetics, of King XXXX, celebrate In end customer at we four in week, It's will initiative a New store of store refined of Street of transform completed the has of newest and significant our Tiffany. In entire surprised Sydney the that opening Australia,

new tourists. our stores as new such destination in China the a -- key in year. in to of course luxury during other DC, plan CityCenterDC, Washington We first important in Greater first customers markets, The local announce the for store and

now our to the in innovative within America, existing expand addition In through which announcement North world. we we XXXX in are pleased stores, of rest opening to initiatives our are to new and the global display evolving also fresh presentation stores

our which more delivering experience of and both a ability terms to In the of omni-channel to number benefits a experience, now Tiffany's upgrading are exciting provides we website globally, innovate. consumer

in journey in content and much possible. optimization. offering blended commerce, agility give elevating of as user's testing, The rich the as while personalizing the the a are reducing enhancements We experience and content Tiffany more brand, friction

For client available filter website, US distribution. to have period, expert In our inventory and rings a on orders for recent from customers for accepting perfect been for offering rings Tiffany has diamond find we purchase sale, addition now just love begun beyond select, ring. can store consulting example, online. tiffany.com phone diamond to in engagement diamond on the US our solely

continuous So we natural we plans experience process and in and in-store engagement to and a I the a year is look referred a Including digital category. of China summary, recognized the ago. in Tiffany expansion to believe In later brand company this to journey capabilities love year. of our going operated of is complementary are the forward. size. our And the still for improvement forward exciting The website that one long e-commerce we in this in early enabled introduce increasingly stages

very is the organization I with is long-term day. outlook strategic now believe call every I talented Our Erceg. turn priorities, our and aligned agile Mark the over that getting will and is proactive promising. more to

Mark Erceg

sales year. priorities performance, fiscal about operations, has Since cash flow. Alex diluted a to and From consistent our be would in perspective, hoped earnings those little on earnings words Alex. commented investment we share declared just results few XXXX what to strategic a our ago an just when from financial order and with that are net properly over let per a six XXXX fund me priorities achieve fiscal say we free year Thanks, shared already one

sales $XXX fiscal mid-single-digit us stating support in XXXX investments to You be order a will areas growth. earnings X%. essential with earnings were million operations to recall to in million were flat meaningful operating at long-term sustainable number slightly XXXX that, during to of from $XXX a felt approximately that expected came decline fiscal of fund down across versus we Consistent

reform. with We US also benefits passed significant along associated tax

year year we tax in rate XXXX And XXs. more completed effective Specifically, overall our we we XX%. expecting ended somewhere became the ultimately information just a analysis, started over an high fraction available and as the the

XXXX the While primary EPS rate us with include rate the that fiscal which did $X.XX guidance guidance being we and somewhere of was lower share. share per per some to effective effective the one-time $X.XX directly end the tax between at the tax statutory rate, $X.XX was of associated provided higher finish XXXX year $X.XX driver share per benefits, US of net with well to diluted initial not a towards tax lower allowed our our $X.XX to range last above

of payments the tax flow. reform, we projecting million approximately of revising Finally, And to account free $XXX taxes $XXX flow. million to year and including cash cash projections increased related the inventory higher for high ended levels, started US for income we our free after year for at jewelry cash

roughly total in years, shares to out This investments with $X XX% net we flexibility. perspective, past short-term From fair versus by I and of source to across our $XXX in performance So was and growth, of we think million of more and $XXX delivered and of repurchase operating indicators debt. million than of billion dividend strength financial cash the the after is a earnings key earnings, rate year sales say total that balance XXth stock a means our and to after our common major which equivalents long-term we short-term free remains quarterly increasing the cash, increase finished spending cash what set flow, and it balance XX sheet our sheet achieve.

sales the on when preliminary we holiday In outlook reported provided terms results, are our full low-single-digit slightly XXth reported in we for growth on the mid-single-digit our unique of EPS higher maintaining our basis sales as for factors. year modest a worth and and XXXX, a guidance January expansion number exchange It's increase of a EPS. mid-single-digit of expectation forecast includes constant growth margin diluted rate for operating and that noting we

be flagship is per was to XXXX, $X.XX $X.XX SG&A incremental each in the related expected to which of expense in XXXX York $X.XX and project, per XXXX. share store to share New XXXX First,

to for due our able XXXX on an be gain accounts fact previous leasebacks no $X sale we a new a Second, standard. deferred accounting forecast recognize year longer to the will that million

points all-in an spending grow we comps. to adversely to percentage, meaningful strong and by expect full to foreign base fiscal comparison affected in XXX a difficult a while effective a expect From January XXXX, year we than period standpoint approximately tax tourist roughly expect low-single-digit is XX% timing rate sales higher XXXX. in headwind, results, the we a and several with reported basis Finally, income FX be which half consistent sales by of lower first factors,

are sales in resume to growth the resonate and annualized. items, wraps brief as becomes even That affected new second marketing in our these In first the expect not experience products And quarter we half these earnings fully to and second negatively introduced, stronger, up throughout continues year. my growth in-store spending that year. and addition yet remarks. our additional message the reported to pressures XXXX strengthen of by has earnings will that of also lessen investment half incremental strategic to anticipate began will We the be

So back I'll turn the call Mark. over to

Mark Aaron

Thanks, to Mark. Operator, some ready we’re take Alessandro and questions.

Operator

Binetti And will Instructions]. come [Operator question first Michael with Suisse. Credit from our

Michael Binetti

the was of could and at also you I easier puts the rate the the comps just with in understand puts quarter. got maybe to then trying -- speak bit some takes mean and significantly. a of the growth I fairly little why gross leverage some Mark, help the if the on SG&A curious help slowed I us to on SG&A and why it there. a multi-year takes? slowed see basis And margin on guess a I'm looking fourth why the I

this rate you anniversarying I would the big growth previously of talked for step to kind the your year said think of comments of about the some that up investments? when point break be middle we in

Mark Erceg

sure. Yes,

for think margin the year. gross our up full fact I the the gross XX was I think point, XXXX the story in is margin points that on basis bigger

fall And what in number balance lower always as growth unpack. on that margin, far of our fourth than can overly the year. helpful things I think don't effect, that. given As of there's sales course, happens any to of in gross the mix that's was quarter There's quarter any within

And so there's less fixed line. COGS through costs the leverage even

ensure I And takes that that is our strong. a up. bit about is we’ve that programs lot think of cost the past SG&A takeout need in of robust gear and things the to are talked little the far time a to As concerned, one as

than we're lower on I to So we seen that we're about And the quarter to might the we that's throughout that growth. year, extent operating think expansion SG&A XXXX, positive in have for saying sales margin provided as indicator. guidance was the growth get basically going the fourth think a low-single-digit you

So takeout continue and in I point. to up ramp seeing some fourth think, quarter think programs I again, our of you're at cost this the that

Operator

with Lejuez hear Paul Citi. And from next we will

Paul Lejuez

to macro point can could that be curious you you you're feel am able biggest is makes at, working you Thanks. you a think curious what relative if I then any confident us brand just quarter that am amplification share and hit data disappointment you speed are also what bump? if to I might the with there the surprises? before you that thinking you to what also of were Anything about, curious, provide? to that this it looking message was the any positive started,

Alessandro Bogliolo

as Paul big the change it for Well existing are see about sales a are customers your questions. you And pleased increasing. new customers Thank in messaging, XXXX. both to was as well we that to

is brand, so, reassuring results last them our was if new putting And quarter in back. the on even it. And existing contrary of also the customers to are not we in away And the we but terms sales with message happy is that think seen I from which have it customers, softer. bringing

of really well part hard course external first quarter, the was our working put we in has of side, it because on of all journey we Now think last the factors, Tiffany of very that fantastic were are in but the are that internal puzzle we been the in not adding year of and the it so surely other the But this. of the by as are was the on transformative from last first pieces far year, together. we it general affected at industry, a disappointment, quarter terms especially luxury, have as in also mix seen factors, I the

So, working were it we not ahead, are going we but perfect. on

-- addressing things where mistakes are a some have of lot had a we it. are we lot things. We and done new Also made and we learning

mix So I’d external say reasonably but also internal of a expected factors. it's

Paul Lejuez

Alex done anything what those internal you better? have you factors, would can share on

Alessandro Bogliolo

operational mean holiday started that And of other think all give I example, was good year Well, weeks is this -- it have things earlier, of life innovation. the that, life I would three detailed the an the company. to many for campaign example. it's -- because experience I a

adjusted keep And is the we analysis the very when good so, we fourth surprising comes set most and results communication. to of customers have we plans are quarter thing -- us it of have in our to for on a that important order

communicating was happening at the So we communication because big it for that new example I something it that appropriate have and XXXX, seen was was think Tiffany.

surprising same communication we is Now want to customers. one don't XXXX our many expect on And example this the because keep others. in among

Operator

with now Company. And we & Cowen will hear from Oliver Chen

Oliver Chen

balancing that what what points and good to your and Hi, modeling sure and leverage physical? margins And needs Mark the are compare between on at price about what generations as or just managing in-store intersects a lower for higher terms experience, a love happen your morning. those digital that Alessandro, over thinking what your thinking time, you're order question, are key price And the versus make new priorities hypotheses channels and also how thoughts you. with collections? would in you digital in of points experiential appeal the to innovation inventory think the really and talent? e-com we about blending plus Thank about e-commerce and did human how the

Alessandro Bogliolo

there on is Oliver. new is is efforts question, all you, the for different are a to there things, innovate, introduction cetera, this puzzle communication, that Thank cetera. products, upgrade, et with elevate Well, many, there we new first because of is many these et and making your e-commerce

big We said different ago. that to do to now work not years time for things unveiling. be will have day every we But that a these everything to and all areas. take year to three decided and close and together, one then in on to we So put decided

to unveiled things. have I example, we it have to season. I literally would For yesterday. November would new have the or October preparation in to do loved in time the website But of loved that holiday is it have

the the one, company things, go come that of: a this innovate, more to order improve, are the when be be innovative. we this really in distinctive, will more more together. these it's part faster, And see on all the way, adding So benefits, along matter we be in both we entire

Mark Erceg

offer business. to at I past our our the we year could think continue the expect would years. we twice Relative of e-com balance questions, roughly that And this trend for to the rate your grew of least business -- overall next several that at

that e-com a that As and with portal items, far to is of we at website. to have priced as sell your running could associated higher off the an you of not than products more tend you profitability, items imagine, whole e-com, running jewelry lower the sell brick operation. mortar lot going look to tend the high silver And a of be on that if you're pieces they them, cost margins less as

to of gets order enable clearly and is customers, need the So what mortar. management and don't is about any in at in well. systems, a as that driving time, receive systems, kind inventory But whereby our doing. model to way later the inventory just choose I it's on they up put to site. platform get e-com And been structure, China look we're at to question to right that fair however want past in we're they which the We're that. seamless order our website we've e-com up going towards What it. we've serve systems, alluded talked any which our running think to to inventory e-com Alex also would we in about fact business, brick But that's we to to that new across extending year, more the talked customers we're excited again, put we’ve the say shop, market distribution to way. necessarily it about we choose product that management digital we a our profitable that And than the any can this your

Oliver Chen

Okay, inventory. question Mark and just on last a

we customer sales? relationship the management model expect to ahead, would on was theme As And to that Mark and that relative side, how trend information system a you opportunity.

highlight, If That'd information the your you you. could innovation? be with Thank ahead what's in great. system roadmap just

Mark Erceg

more it that we've seen below as is efficiently. jewelry this clearly made us. invest a very in network sales. work grow high well I think is I we beyond allowing of guess offering, inventory, to work In say rate I point all systems at better more relates we manage that, and past inventory the this a and then it said will our to I goal which choice year, would that our at to of be us for our the entirety And deliberate discussed as to

Mark Aaron

could yourself to to just us forward, please try part indulge a ask, I single going and limit question. If

Thank to. have a the to queue that like We of people get you. lot we'd in

Next question?

Operator

next we'll with from Oppenheimer. And hear week Nagel Brian

Brian Nagel

With go request, and to the of there's earlier regard on margin one. I’ll shift moving someone has But But and margin. back asked year. about lot this Mark’s gross I to over meaningfully gross change understand, to two I pieces since a even question -- off, in first year-on-year -- trajectory just Mark, moderated will questions your in

the representative is to have should sales and that second understand And likely -- month, but abated around as did of better, help the Tiffany, if thinking month happen or of move So holidays, necessarily you gross about then we some we into the the should pressures not margins side, have have is as us XXXX? begin be understanding macro January question And we look January. I did how takes the in through QX. now maybe impacted could puts on the

in business QX reported been the type strengthen question the any is, not final today? see the did of that reflective you results that underlying may in So have we

Mark Erceg

margin, it. think with Well, we a it times. Got I respect number about talked to gross of

a we're forward inputs to drive that six frankly years, talked expand to that very, design we about those moderate going gross allowed typically very products, commodity pricing margin about our to workshop, to out, have going We've continue gross we Obviously, therefore past our we introduce try when us margin and there a favorable Over engineer to the flattening and that had We through margins. and having commodity innovation last in and our combination cost in price five, takeout to costing rapidly that new are us power. to the expect there's talked those a been of jewelry and way has as the accretive rapid those been fact well. tools. cycle

We pricing we continue to pricing have current year. the to be in fiscal power, we and plan taking believe modest

have grow part gross to long-term we that and believe our forward. is some will high-single-digits, sales we So algorithm allow that our of expansion algorithm obviously a form out mid-single-digit laid margin and us EPS going of

Brian Nagel

sales? Thank you. regard And then with the to

Alessandro Bogliolo

-- it? what mean sales You about

Brian Nagel

Sorry.

in an I market government So have that, macro the abated. Tiffany the broader I mean through some that January, making pressures impacted the financial specifically -- shutdown…? might prices volatile, the assumption, see that of I the guess mean markets I'm holiday are less the did you

Alessandro Bogliolo

we saw reported. similar to time saw the sales enlarge the that two that Well in is we during one holiday in the months we the and January by actually the in

Of this course course an a of normal business. uptick New Chinese China Year because of in is but there of the bit little the was

nothing say would for have what we holiday. reported than different I So

Operator

next Morgan. will hear And with we from J.P. Boss Matthew

Matthew Boss

is to performance strategic stages strategies? that just the the the on about we P&L see today and dig the elaborate expect of from in turnaround think six help each your that timeline priorities, and Maybe early as we into to Thanks. should view to us

Alessandro Bogliolo

basically Well, encompass business. -- it's priorities -- entire the our our entire strategic

So, first been the one. communication has

is intense new the we and other then now active jewelry, beginning new What launch been during year engagement launches more the continue busier, products will approach and last this with will of Tiffany there have with the different of True year. the you innovations, see but year. more We ring

for year, the towards we so the holiday. add working of critical the in end And are months order to

the several result this et are one remarks, that my of are innovations negotiation, course and the seeing year important You’ll DC, on we stores have is there last in opening, year start more of cetera. of and this is like I important And it it's lot beginning the you as since didn't for seeing doing the efficiency to that of quarter. a we show is also efficiencies important to. in remark know, be work we several a to achieved, on And the that network, Washington because fourth the come. why take have you’ve to that I And think the I started half that mentioned referred that quarters, committed work started Sydney, this something sign

lot how for of at on. I things we a probably are achieved? we So going -- we Honestly, plan. think much the our Well, have of at sure are beginning

will We reached first is are plan our term probably and critical that in there forward. of mass a going the be

we very all are excited things the So are we for doing.

for are confident it. we are and We fighting

Operator

next And Stanley. Kimberly Greenberger with come question will our from Morgan

Kimberly Greenberger

cost goal? And of journey, your take will But is basically and innovation, it's of It's aggregate sort all do ideal strategic when I'm it to fully of on time your How it's say us the financial the will year course, a follow-up ultimate to “All end results that a sort strategic that help majority you journey. we evolution, if journey.” sequencing impacting a strategies does in a of of evolutions for these long a two-year through product way program, their think journey, three-year your strategies of vast over is, fully question this there implemented I this just understand future, is Alessandro, you priorities. about how of just there business? five-year think Matt's message the there priorities, wondering, about the be right, I'm wanted culminate sure could the be work of you the really in the impact efficiency your And your time. strategies of where that believe the your six

Alessandro Bogliolo

this place, my finish, question I and in be colleagues, for your completed of strategic exactly which of we productive. mean, when because this this and that project never to journey typical answer plan especially a it's But to horizon. hope next on XXX put hard to I for like specific a have I that job, mean years. one keep say, the the will my will innovating we has about But the Well, will is quite I everything date done it's and three year mean security

started So of would it. it’s -- year me And and when been all have this, then year, increase I But we I started spending investment about a mean should last one do and is I it’s very it of get not this we clear big is ago. exactly we a unveiling. work that and have we we this for the most mean really matter XXXX I why say not

the We we not to do if of business, and our this improve not benefit for flagship day-today store for it day even but will where every want is fully ripe.

to answer short So your question, I XXXX. say would

Operator

from Advisory Group. here Telsey Dana next will with we And Telsey

Dana Telsey

everyone. morning, Good

we are are you new how forward, newness planning Thank jewelry, As you. And XXXX, you forward you any should and foreign that engagement how this about think tourism, jewelry for to? if you designer going year? at planning looking about then that be pace of think collections, collections

Alessandro Bogliolo

others. for business to And more is let US the example, on to tourists only when the and the but very volatile part best is Well positive tourism in in that’s stronger on difficult the and customers. China, been at That American Chinese by affected US negative and seen dollar have investing general, Chinese with the sales, notably area help we our not an But way end to of results. to our keep the been with nicely, definitely strongly business, we are of are we believe tourists, concern but in we sales tourism still they that so customers but very in of and second domestic also doing And year your you, and with question? didn't domestic working geographies towards South the our affects what strong customers Thank growing have has more domestic trend growing build across tourist home. Dana.

Dana Telsey

designer and engagement collections …? jewelry Jewelry

Alessandro Bogliolo

Yes.

with different of T design, innovative, is a with totally have setting that newness launched T. and of in but with that mean it's designed it's with now -- will is more event already the year. it’s started important set And But entirely coming the in launch because new a We definitely ring the and already there True it, also newness, goes love engagement. engagement but jewelry much we is very Tiffany that distinctive very rest an doesn't very that wedding of both boldly

collections, we Tiffany collections T will So I without this engagement gold True. is area. and mean say with answer is the Then existing diamond. platinum collections innovations by and for important and in the several

there As the designers, of designed product less the past has designer the for innovation. business innovation definition it’s been that area more originally it's of there because the is so and by nature for in

Operator

And from next with HSBC. we Erwan Rambourg will hear

Erwan Rambourg

morning, on think Hi, a China. follow-up taking strengthening for looking Yes. renminbi. gentlemen. Chinese consumption. And good just repatriate Mainland my wanted at the I Chinese question. the I of Recently, had same is within growth the Thanks to time, you've to administration

give be terms wondering, consumption, Chinese you renminbi then on was seeing to seen Mainland e-commerce strength? And could in tourists more detail of inflection growth within just you in the linked you're the any the to if what if recently I'm that wondering footprint. So Asian Chinese could to would relative linked I just comment region about Have you China. us

what to Thank China potential partners China. think are So in online I your you. commercial sell to prepared looking is wondering launch you mentioned website today? I'm you you footprint your or in existing remarks a -- platforms in that with

Alessandro Bogliolo

of the Thank January abroad, we Chinese than you, a in in have pattern Erwan. Well, quarter before. -- seen sales the in customers recent not so also different as for tourists,

China positive we seen in very also holidays trend keeping that into during January. have a continued sure, For

we the for an Tiffany fact for also finally, dedicated As will that, China, is website in a important website. us owned have

ourselves And plan so do in we to we it independently most world. market in the the important as have

of where we the we course, China, you be to it can et that well the on are e-commerce website. world. order that Then push will in very in rest into So, company media cetera a we website social traffic use can do chart know, many our in operated as of as and the --

very giving to in full-fledged can the are with maybe would hopefully we can can I customers be brand a and so visibility more of website sales, sure hopefully assortment, learn it. especially brand about purchased, stores. So, then that online the explore for Chinese for learn but for and more to about products buy the that excited they having say the

Erwan Rambourg

to website. But just selling will websites And skew platforms? clarify, through you own so some the you to to partner traffic products offer your third-party will

Alessandro Bogliolo

Yes.

now we'll like we done and in past, our overall. will stores these doing with activities third-party, we business already also kind As have of the the have at keep activities

Operator

And Bank. now Di Deutsche will Francesca hear Pasquantonio from we with

Francesca Di Pasquantonio

was I ask divide follow-up? Flowers Paper questions, domestic remodeling. Can clear lot experience, on the being two in-store please one first in a first year There and half is a branding, a is second between And The through mid-XXXX. launched US consumers. in of half is one and marketing US

top from half, half? The affecting drive down So on and irrespective your the increase rather growth wondering the SG&A to say expected Thank assumptions we leverage done has needs. second incremental may first is of the comfortable be York the a what pockets in a be the if of competitive also be that higher investment you seems favorable sales framework Is with luxury much fuel store some this that of fact SG&A. visibility competing efficiencies the of you very facing? New disruptions saw what in brands? combination potential position some so terms than I And in seems using you. including how becoming second and And the trends, been is within in given to be the better were gross was be let's on remodeling impact leaving is follow-up the to that margin to could to when question going so the the much coming of comments

Alessandro Bogliolo

was the So Francesca, quarter. quarter, the especially Well question. the met customers. our we very in the Paper the first collection true; In for you last fourth strong in That year the by expectations. softer was about demand declaration it's of it in also your and US thank Flowers, domestic of part had

Now product price I specific we it this points. all product, because don't also categories different affecting say any to and saw

the And with consumers and that exactly confidence to December. bigger see of course our I that to US of with sure stock more the November do that more linked the Don’t factors -- something affected quarter. of and forget the there So in customer also were environment. did that third in market poorly related really several kind price for stock are macroeconomic

Mark Erceg

six year, day, you expansion, a that's key of not clearly So that margin try something been the At the lot to operating against. question, that laid was we expect priorities improvement basis that our expansion. what expected still down out. about it distinguish up in have focused about we've operating the we suggest about we're SG&A of for the again, that We thereafter. one be That's and we on. modestly just guidance whole margin all still asked past efficiency. where In long-term we the clearly between your expected provided see expansion. of then And gross working we we end to again a to it's and to year XX margin SG&A point And that balance this be that stated would would algorithm margin margin

dollars between associated far accelerated comes an the by depreciation we for things flagship related of had incremental store, for about to It's the as because The now the be driven itself be project it an expense are and will principally relates math. We capitalized. consultants then and related that come to transforming that really that the that need elements to project when three now a into others the as there in expect depreciation -- go can't accelerated but play depreciate not a It this the sales said number of elements would disruption. disruption we the space. temporary over year expectation on of some dilution sales your of really store. to are year, down it that, don't question next live. somewhere that we Those we're $X.XX that to $X.XX And $X.XX. As rent with certain existing past to

Alessandro Bogliolo

to during so it year, by are in full it the -- works. now be clear we XXth keep working store will meantime a will as and while the will be flagship Street, And store is, not for the just the as we temporary be in working impacted XXXX operating already

Operator

with Drbul And our from next Guggenheim question Securities. comes Bob

Robert Drbul

about was projects we should wondering, really the I an systems you're and for? talk you. investments keep can working biggest on technology what you just on Mark, and this Thank and eye milestones year

Mark Erceg

Yes, we which countries. where a It up is management an letting That's in what three other as We common system, system. financial year foundational systems. stood different past absolutely. standing bring order on also about Asia give One Coupa common to that common buckets. it's is in module. is we're management call We've Pacific a large the us talked the China and in one past indirect inventory going procurement us queue, this

Chinese go geographies customers earlier, reasons the website, new we of to to support now I to product We're can because enabled forward. up to one As ability intimated as additional through we that continue that going the have that's we now a provide Tiffany portals. those the stand

a that and get the that number to on relates continue though, now we It up between it of endeavor. system. world to As stood entire will take years,

lot very digital about the obviously a site. with now take lot replatforming. I this clientele we always portals. past our capabilities do sheer really here, and and to won our chance new to testing our website, the didn't dramatic a from go be outreach from tools forward that, will we a dedication step We just was allow think talked force of you at of the e-commerce standpoint. a them up thing proper if things look well to that get do of frankly, just a And they see you'll but week, through lot of to standpoint, We've the a a of will a just the the Second the of stood in was have But done awards. teams in able

now And together lot we this data replatforming to we're the And on looking we so put digital on forward. year, do site hub, another the e-comp big the later our work of at so need step then once and we're well order analytical can JDIW do of also we working CAD/CAM our to been is systems a China for that'll packages in get And work jewelry our in a be we've and elements related up way lot innovation obviously We've workshop. which planning lot of a place. lot production on also teams. a predictive the get design our working the on advanced been of to that

IT our our lot associated So with of there's transformation we a systems that will of continue. elements big

Operator

Bank And of from Merrill next with we here Lorraine Lynch. Hutchinson will America

Lorraine Hutchinson

jewelry on positive you US better the follow-up True in in engagement to in business think wanted were could and just global I trends quarter. was I fourth decline launch XXXX? in do the the Tiffany the turn into territory of wondering, that

Alessandro Bogliolo

to the seen first quarter Well, Yes. all across categories. really compared year, all it’s of the have sales deceleration product spread across look categories. you rest at different the the we if of between been deceleration the has fourth the in actually And

engagement about don't rings. see anything specific I So

of Now limited. prelaunch, example. But what in sales the just consider US in of course did overall has engagement very I we an out Tiffany give in True, I’ll rings. expect improvement been that an mean we you

X.X part assortment concept, expensive over of to stone pretty launched the year. carat of be is it terms the carat, and that it the also goes carat the stone X part and was In from going jewelry a with in the will just limited it’s now that of really

diamond still a the engagement stores also several So early brand it's before decision website for the process in the the the cetera on especially I and decision. long. interactions think making several of rings, process is et with to takes rings Typically very because and customer months

very of kind not really purchase, there. impulse but it’s an are we confident So

Operator

And next Vasilescu Macquarie. Laurent with we from will here

Laurent Vasilescu

thanks morning, question. Good my taking for

last pace count to investments, employee X% this grown they wanted I on any in in compared XX-K, years morning’s the And XX% count chain, growth we two for you've by to your Regarding account. digital then Were these employee around or talents, your expect follow-up other detail over employee the in were a XXXX? approximately to continue of increase investments functions? should the store supply

Mark Erceg

a that but we're the in continuing retail little of seeing it's either where Yes. there square manufacturing bit what space, on principally the is side. Principally footage, you're

basically a operation of large cut And several in we capacity because we and that to for As stones, with do a through have exacting that believe and additional standards. individuals. competitive continued add know, advantage polish thousands is very to our our regard. it’s own we we And us

that's and seeing. we're that a you're as bringing in internal that of we versus well. at that house benchmark competitive actually margin up we we're we of confident accretive do external production course, So our And better all end a really what product effectively And purchases. cost, with through

Operator

will from Ike with Wells next Our question Boruchow Fargo. come

Ike Boruchow

of bit maybe Mark, guidance little the I kind more. to dig a into wanted just

an your that. break first half, I to a a little appreciate earlier apart all possible started the decline investments because really lot in greater your But is So of QX. it XQ the in in to in we think point XQ EPS verses detail call spend only bit

and So not currencies also larger QX. And to are it seems seems like a there's headwind bigger in headwinds. tourism it like mention, likely

magnitude decline the QX on comment QX? could versus in you anyway, the So of

Mark Erceg

though, first We the thing that below guidance. specifically in the see rates to will want the only is be providing think relates I game into that of start getting The me half out to year. FX. of half one Two would think I you'll the to things quarterly fair to second are the do don’t say point want we for

that what if roughly second quarter headwind to based and point help. you have basis first a to right period. X quarter in time a fourth XX X spot, now you would is and by see By point get so that sit the becomes third you you’ve push versus spot point take quarter headwind the we're on quarter, prior the today here by the So the you going is the

element. one that's So

won't said would I say we quarter. the our thing we spend you get the rate of other it annualizing yourself, The we full until be addressed second

I of indicative share. what could So factors those two probably are

Operator

from Goldman with here Walvis will Alexandra we Sachs. Next

Jocelyn Welsh

or a here -- working there you've Hi this this working more experience store most, staff or training We been is bit What's improvements the on year. some want displays is it to changing dig changes making the Jocelyn in what's for Welsh of and Alex. little into there?

Alessandro Bogliolo

It's a mix of things.

example, full things in not all the yet in Because and to have have the it for North rolling of we America, really world. we have are now to world, out add it, these actually literally the -- of the the implemented benefit new together. the As will been in for displays of rest rest

we among provenance sure in our that made with luxury the uniquely the now education training, aware fact sales that the the diamond, -- a the these for order I training. you're been that have, As to to am the our share has country mainly public this and All of the January renewed elevate we by there of in of origin initiative professional, training diamond of early -- origin brands been in customers we for in diamond or diamond where expertise solitaire we part rough. Tiffany the all has

time is are consuming, the it. but we Now do. much activity definitely important, of single say how Difficult increased benefits the very to very it's driving, train. are factors thing -- right it’s seeing all [indiscernible] percentage to because And surely people are for these each but now sales, to of

Operator

Retail with We will Shapiro Tracker. have Marni from here

Marni Shapiro

versus home more versus little could years, But for that your from they consumer? They when guys. spend bit tourists I I’ve the read their about people to to a you spend your seem at on local talk consumers be just over how Because tend travel to different they many is more if closer a kind Chinese bit wondering which broader I'm travel? Could same you they reports little a loosely. Chinese consumer. vacation, you is about thing spend the good of buying believe when home, buying contrast buy when

Alessandro Bogliolo

especially of them. they the very general a Chinese spend consumers lovers compared diamonds, big rings but with are average is Well, with I and in -- Sure. engagement platinum consumers, think strong are different in to higher rest gold the of they world,

a customers, tradition, example, not and big For with category tradition. not is there small sterling Chinese is Anglo-Saxon the strong silver because

higher one. of brings much American or the Chinese So purchase -- all European average the customer equivalent this higher than

more versus around destinations sense In that not China is are the the world customers there -- are Now traveling of that -- difference there Mainland material. when come depends cities with customers. between destination. the second for about budget, on the affluent are really It that are from purchase in Chinese they smaller the that a more destinations are for more tier more

the he same that customer when So as is at or more to then do of end with customer of the is the the at day nature really abroad. the home the because

Marni Shapiro

New saying than or customer what customer a in who So Japan or Paris Shanghai shopping shop second there? tier is York, into less spend might city you're

Alessandro Bogliolo

this. Yes, you have generally speaking I like mean, cases

Operator

next from Nomura Simeon with And will here Siegel Instinet. we

Simeon Siegel

be been in Thanks, reduced And out a year, from where large the percent you've level sale Thanks. margin you longer just see good morning the that of do -- guys. marketing Recognizing this calling the in at room and rate this point? is as term? how Maybe that? more increase diamonds, levels see much any to wholesale many right how of you sales impact any 'XX and reduce then marketing those

Alessandro Bogliolo

a far to X%, as marketing we expanding Well the in of X%. was X% years sales of the X% past in rates evolved our as tougher from investment marketing to that is our expense concerned,

the is rate right one brand current this that for think like a I Tiffany.

And so is forward. we this what look going at

Mark Erceg

volatile I at roughly sale this million past bit a wholesale would it's this very its is of for by be obviously I XXXX. that effect far something and as similar in point, mean was little it something And into as is $XX modeling expecting that Yes. diamonds purposes the concerned nature year,

Operator

turn back And any Mark question-and-answer to I'd conclude or additional closing call the Mr. our session. over does Aaron for like that to remarks.

Mark Aaron

you. Thank

Before express all appreciation participating today's want on for call. concluding to to you our we of

feel me the I your the market can that think and Xth report note please contact any on host call. call. to we comments. wrap additional free results expect calendars a we June on now questions first Operator, always, to quarter Please before As conference with or up opens

Operator

conclude participation. you This you. for our does for your Thank conference today. Thank

You may now disconnect.

Tiffany & Co (TIF) 22 Mar 192018 Q4 Earnings call transcript