TIF - Earnings call transcript Q1 2019

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Operator

Good day, everyone, and welcome to this Tiffany & Co.

First Quarter 2019 Conference Call. Today's call is being recorded. Participating on today's call is: Mr. Mark Aaron, Vice President of Investor Relations; Mr. Executive Chief Tiffany's Bogliolo, Officer; Mr. Alessandro Tiffany's and Mr. Erceg, Executive Vice Officer; Financial Chief and President Mark Jason President Wong, Vice and Treasurer.

ahead. Mark And like at Please Mr. to would go Aaron. turn the this conference over time, I to

Mark Aaron

results, issued at Thank you, everyone, the were news quarter you've joining which XX-Q. us filing a a the of earlier with to and report had Tiffany's on I what call. today Form to on results release we first today's for financial We look with our chance close quarterly hope expected.

Mark, from Alessandro Q&A will comments will take with Following to and remarks. your Jason And and wrap the we following closing be call the some then pleased up I questions. session,

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

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

to turn now Alessandro. I'll call over the

Alessandro Bogliolo

in update. that healthy further taking will many this first softer the been set in than And for first are pleased quarter long-term Tiffany's the our to standards ourselves. up to a slightly quarters results place long-term There obvious. following state ability everyone. at were the quarter. and positive Worldwide declined hello, a year's brief generate you expected. not to and sales growth results exciting XX% first Regional in provide Mark, opportunity X% I'm I recent have growth. to last increase what have we we initiatives should Tiffany have Thanks, strong

sales worldwide in on to prior were by same Japan. sales a basis, growth the and with year rate exchange Asia-Pacific equal a basis in However, changed the Americas then the decline constant results the on Europe offset and in

We a that significant on had external pressures impact sales. believe

example, on tourists we the Americas. to impact retail that foreign first For sales dollar in believe had strong attributed meaningful a the quarter

a double-digit American declines in Our which internal in last even a approximately estimates represents low among declines sales sales more the pronounced of our were retail fact percentage sales. with of were indicate down year. year tourists, Those that Chinese half tourist those from ago sharper second than XX%

this of foremost, that our then of relevance why excitement success. heights the amazing we what noteworthy. ways are which This the with retail constant and and of are potential, strength underlying China also growth basis being strong more to We global identified X% this believe our on indicate during a up first which be remain are brand. by focused will mainland the estimates currency and can particularly that However, company we to strategic within priorities strongly internal brand is were strategic enhance in much approximately new and and future from executing pursuing numerous aggressively believe -- our first much we local priorities, customers, sales growth better takes control quarter effectively indicator our

Let a few me give you examples.

to PAPER FLOWERS add we collection renew this launching to are strategy to and our product continues designs successfully year, to continuing offerings platinum- new the collection. gain Our momentum. After last diamond-based

in ring introduced we collection design rings. gold a innovative platinum engagement featuring or band collection, with well accompanying diamond modern TIFFANY cut as TRUE recently an as setting new the is major with Another a

a we Bugs collection. our to recently complements that Tiffany scale, Return Finally, Tiffany smaller Love introduced have on

which have to in our driving across gold with we silver, Bugs also categories. our consistent Importantly, product included a value is continue version Tiffany higher-than-average to transaction Return strategy all to addition of of Love

And innovation the I of collections and I'm planned second years. can the a newness I'm with visibility even now of our for that also tell greater And others. is you have have excited the next we about Tiffany substantial we several And that pipeline T half to for year into pleased developed. the product HardWear being amount additions what among

and the brand current color progressing our attitude The most especially richly made to Tiffany. of and beautiful some by models most recognizable campaign cast brand's a our on fashion world. unexpectedly iconic with blue Focused strategy collections diverse the worn evolve and of in Tiffany joyful showcases We the steadily and message. are iconic T., the amply also Tiffany unique campaign jewels

and the social the towards digital investment and assets -- Importantly, is directed of campaign directly most campaign digital-first a media. other truly with

our to to for and on visual we at And presentations. legendary of publicity also add in should the And launched of our are display merchandising to making we enhance Lady were track Awards impressions this stores Diamond. that media America. initiative our We rollout innovative XXX-carat I made global we fresh Tiffany Gaga received and Academy the enhancement stores after in fall. have globally the to North appeared by initiative social February late now all substantial in that highlight substantial year in-store complete wearing progress are last the elements

also in in have quarter. CityCenterDC We new our some new complex. luxury stores store D.C. in first the the added We opened Washington, first

a of in new corner Pitt and opened store completed in of we important our relocation Sydney. King also store most magnificent where Streets the at Australia, the We

year. double-digit to rate We are development continuing our first mainland quarter. a continued sales in China local this exciting in grow by in currency And the total

encourages innovative showcasing distinctive store format, initiatives recent location our redesigned World in experience Beijing's an an Our and that exceptional relocating included X,XXX-square China self-expression. and a with retail foot to interaction

brand. Cat and store experiential Tokyo's the offers to even on iconic of presentation and From jewelry designs concept floor. the Street we the at a Street. store a Japan café of accessories, showcases Also selection creativity houses Harajuku, and in wit, for Located curated and home a the top the design thematically at Cat Tiffany timelessness opened in

of projects Once completion XXXX terms to to New adjacent transform of the In retailing the begun by that will flagship space XXst year-end. that completed, adjacent York shift with our store location into anticipated temporary has and space construction experience, an on century XXXX. we for most our space of

us ultimately content enhancements and of blended a to optimize which, effectively more expect that customer offer will of commerce long quarter the Complementing in enable better our test, websites the going in experience we a relaunched base, with content store first term. ensure global all experience will we and the allow and forward, us personalize to

rings. addition, online In band order from assortment for engagement can first now select the time, in the a of customers U.S.

While business mention It e-commerce And we strengthen prudent, market. company we of are replatforming. faster getting still is digital excited the while China, to which to we first closer that could ensure new digital that our sales total introducing did this decision, quarter grew load a decision we negatively complete websites believe sales, in understandably for revamped conscious second e-commerce-enabled capabilities, believe first a impacted newly about will probably with make portion associated our the are we website to sales. further suspend the that a these marketing an to important balances although also worth quarter in than handle

growth and believe sway our So earnings growth and do from quarter and to pursuing initiatives results available as a our long we on earnings certainly first this not not we the us that recent benefit opportunities in closing, drive are customers journey. are to of substantial us. will longer-term pressures sales indicative forward of move number power external We

Erceg questions. the to Mark now a And comments we few open before the has all call up

Mark Erceg

Thanks, Alex.

exchange were results Alex lower a period, with in quarter which indicated, but for called to overall soft than due a anticipated broadly first strong first our keeping As half year, very slightly as bulk lower base reported the the lessen guidance FX for sales new our get by and second foreign pressures tourist meaningful the results and spending and product half comparisons reaches of support marketing followed easier, headwind year-over-year associated foreign market. stronger launches XXXX

gross be needed just that incremental second pressure during investment first sales of pressure, that included the in gross margin, of strategic if a in are quarter, earn jewelry lower spending, began results sales the cost sales of margin quarter that which expected to in margin first last to little any the be knew we downward as by under well in sales fixed was in an wholesale increase reflected consistent mix, XXXX, is earnings product-related as leverage annualized, costs. correctly fully lower the increase that earns we including Since diamonds and point quarter higher we which anticipated which below year, shifts released. sales as price partially an costs we with Gross offset and negative on

expense of and, sales. SG&A to our management, course, cost the restrained savings labor expense efficiencies procurement tight was from variable quarter tied including organizational global growth cost reductions savings through cost directly through in program,

quarter full the than as Intangible XXXX we an Foreign increase believe estimated tax be Income all-in guidance. XXs. effective the Our due Derived That benefit low U.S. we rate in our Treasury effective was rate said, in will a for to issued of realized for lower recently tax that result the continue anticipated to primarily year

above X% prior year by higher-than-expected Net we minimal importantly, inventories to postholiday growth XX year-over-year of were to expect as off the But work continue we as April continue levels. year-end.

just cash billion sheet and in of equivalents of This remains enables returning Our strong, with debt. with our to $XXX of the total compared cash growth also cash, reinvest $X quarter to us having finished shareholders. over short-term million while business the and investments long-term short-term balance

continue are of in on years couple IT next New we the our to example, flagship infrastructure. modernization our expenditures store capital while invest For we support to of transformation also of more for the spending York the

investing returning repurchase quarter stock. time XXX,XXX our same common by future of $XX we're At the are cash during spent in we we shares the shareholders the to evidenced million of to approximately as business, that

X% In ratio past be dividend our the the has objective in XX%. XXth stated consistent dividend to quarterly the addition, XX is with This will rate, approved our time years. dividend Directors payout Board to our a move increase in of which over increase closer

release, our platforms we more our IT e-commerce system, manufacturing load our earnings upgraded scheduling Operationally, with across the with which activated and have planning our upgrades. we supply sophisticated vertically advanced digital production chain are progress network. Since a and should and being pleased management suppliers new our last made enable system integrated

the tariff the meaningfully balance extent, first the in admittedly softness low imposition of the all for retail towards on being guidance control and from top quarter a and sales foreign standpoint So tourist bottom foreign but relative affected higher single-digit of U.S. of initiatives China rates look we we anticipated XXXX, just overall further productive to spending in continued of to reported export in to not where during for have that line, the the recent we implemented end and Relative From pricing the into the number products start to But declines which the prices mostly continue we are being we the lesser increase all, year. tourist a we throughout the to and, strategic present impacted line, strict soft China plans some a an time. by our at advance. by decision are jewelry growth in and for modest management spending, cost actions to to our year.

million locations. And are as have our else with on and to per into do support discussed principal widen to China mid-single-digit per Since we as year store of not based renovations, in EPS mainland a our at their think last by competitors, $X.XX previous after be per have last we business we on that in growth. is against $X.XX is year expected accounting in import earnings versus call, in on to China we And growth York as affected no per longer New tied the to which to $X sale-leasebacks. share today guidance to contend we our from course, that change account, expenses it we the fact us incremental low higher sourcing gains mid-single-digit share standards estimate costs mentioned sight protect XXXX to to allows flagship everything to $X.XX unique determined deferred taking should our prudent of range into approximately we XXXX not share modestly well recognize lose growth properly of

turn So to with Mark. call that, I'll the back

Mark Aaron

question. now Thanks, Mark. Alessandro the Operator, to Instructions]. first take we and [Operator are ready

Operator

Instructions]. [Operator

Citigroup. from from We first take will Paul now question our Lejuez

Tracy Kogan

Kogan can performance Tracy bit higher of And your and Day around market some for of hoping detail questions. by Valentine's had you periods, you Day, traffic a if Mother's in so us filling region. talk on give It's your I Paul, like the local was could periods. on a about also more those performance little couple

Alessandro Bogliolo

-- Thank you, quarter for biggest the first Tracy, well, not Well, for of our the course, quarter your question. business. in it's seasonality

and course, Mother's noteworthy was and really there -- I nothing would there this. Of particularly Valentine's on Day. Day But is

X% the and more currencies, I led, quarter, think foremost, In positive. with where spread a this local [indiscernible] different we comments by entire customers growth the and the global refer was grew our on first to by business constant around basis geographies, China.

Tracy Kogan

did it U.S.? Did how Any then comment get there? versus Or fourth better in And customers local quarter? decelerate? it Great. about the the

Alessandro Bogliolo

caution positive. But have the customer. U.S. seen of performance U.S., been degree the we In of some has customers in local the

Operator

from take will Bank of our We Hutchinson now next America. Lorraine from question

Lorraine Hutchinson

follow the acceleration launches, gain some spending weakness -- It actually to expecting. What the sales any quarter, worse store specific product in wanted the that you second gotten opportunities. see just through as you're so sounds consumer us sales first are lap could continue in updates? marketing confidence Chinese the on to half Maybe up some I back continued that maybe has help changes, year. your you like half that

Alessandro Bogliolo

you, Thank Lorraine.

campaigns, many We new in merchandising. in terms say visual a all, second have first enhancements busy [Technical Then in of Difficulty] of I would very stores' of marketing products. terms initiatives,

year-over-year of easier, off the more on we starting from becomes we comparison bank assumption after spending to tourist a We Chinese last that decrease quarter favorable that you And mentioned, as us. will have, year. the level the registered third sharp

-- of the the different fragrance the part of a in years the have ago, openings It a we point, in year and pillar so of for a initiatives well after as areas. on launch year launch, second a signature couple of in part second the fragrance store that the as the And on difficult lot the goes successful very relocations we launched new important different a fall. from of

is different say, we very performance the areas. part the are why confident second of me let hard the for this teams on a very year. but a working in feel So agenda And stronger all busy, is the

Operator

Securities. question next Bob Drbul We will now from from take our Guggenheim

Robert Drbul

I us, if last in not know thanks one I'm you're but this doing Mark, is if And sure the August. your call with everything. for don't

the as first question underlying and have engagement the then can in is to marketing you the second new ability talk The of how I about gain bring have a around customers, is you And category. see business of question sort with Can just customers you're your sort talk that new of engagement that about metric? trends of you lot that just a doing? I sort in

Alessandro Bogliolo

have new very What customer in we seen will Thank it's exchange start growth point. is you, customers think customers about is at constant I a because of That rate. a X% I second Bob. and overall from relevant the question. existing local

has that new it's to by with survey -- very in customers growth key this regular as you have that the markets. the do just share relevant customers. existing we driven brand we health completed both annual And well is Now health as been

before survey now campaigns than that we to last able brand, the it are was so was last how that new so compare we it perceived -- when the ago, now when X to launched is compared marketing year. year And our more

brand in we increase consumers. strong brand. we for U.S., I'm results brand distinctiveness an power especially of increase the our for have seen, And in consumers, in the in relevance the of Tiffany -- for China a example, recorded And have very pleased sophisticated because among and the

have the customers, about in progress markets, both customers that months terms very think, feeling gives, in seeing key confident brand least we because I'm the the So are communication existing in at of new last both about them. XX new your question step taken we're to X has I strengthened it and in of and answer we showing these

Mark Aaron

Bob, your for words. thanks kind

Operator

from Our next HSBC. question Erwan comes from Rambourg

Erwan Rambourg

X% my that for help take at Will the wanted the former comp the get understanding maybe percentage and local years, attribute focus nature? decline refurbishing, that there's main mostly the in the insights you're sense to U.S. tell you an equity the QX? to the U.S., to well location and tourist location to Niketown would as Jason. What or to opportunity markets over this on I U.S. inflows and on maybe related thanks open a I also the to impact then be for welcome Mark of American of of the holiday. wanted open stage? that the just all will also be is And to consumers. the is wanted And

Alessandro Bogliolo

Okay.

So there's thank a -- Erwan. several There questions altogether. are little you,

last first the -- one. Let let's will current holiday, not questions That to the open. that for but to only me the the now are articulated. is answer easier be flagship floor other ground go And more flagship building entire

in of tourists The of all, low sharper tourists you a decrease sales it's U.S. percentage seen the in total double-digit first to to about our the in U.S. And a the tourists -- we than So even U.S. in sales for represent the have range it's U.S. bit a this in stronger of even little quarters. in the line not sharper Chinese tourists. the in XX%, of is past we the And have couple seen trend

U.S. course, tourists. this negative percentage on Now comp it has double-digit the impact depends -- on sales because the of a is in of sales

the confirmed relevance China. by local said, would the cautious. affects positive Chinese I keeps is for of the is performance strong with were that quite in the say, domestic And the brand overall. so on customers course, of but being What customers with, that this I as -- me And the important

Mark Erceg

see non-Chinese Chinese of what off U.S. saw add the bit principally second little is retail third. towards fall we and the difference tourism offer Chinese that U.S. relative to did to for this tourism actually would quarter in I We the part into with last respect year a in thing to U.S. a of place the took one The between the latter but tourism

started tourism that quarter other fourth and since The really has to time. in denigrate to the U.S. continued the

Mark Aaron

declining consumer question Erwan's effect might whether psychology? about some the had to on And market stock

Alessandro Bogliolo

to Well, caution the that customer, specifically [indiscernible] is referring I several to factors. this Yes. think U.S.

the that to confidence X compared low U.S. First seen of ago all the of in consumers when we is exactly of the quarter this extremely have year pretty it in all, index the year high. first was is

in We industry, stores States. have cosmetic brands industry, that brands of big country soft are fashion quarter. the also seen in sales big United they the the in a you in in reporting the the -- look also first brands have if the in entire U.S. presence all And department

So it's it's positive, very cautious. but

Operator

Our next Vasilescu question comes from Macquarie. Laurent from

Laurent Vasilescu

for decline you -- XX%. the of for tourism on Thank all can much what decline the could for year very us the you tourism And a for commentary little bit U.S. any on Mark, gross then U.S. be this the of tell commentary about progresses overall contemplating the you for you're curve as would line shape it the year? margin guide top helpful. very

Mark Erceg

so I'd the one But predictive overly you. us hard be of. are Thank for trend-takers, tourism is to tell you, speak. to we

necessarily spot here had get We're assuming get any trends presume with of thing that Just assuming same on. also just things better, that like doing year, we the not and worse, the kind through tourism. we seen any what but not holds balance we're of continue things that FX the the we're take

of don't could we're suddenly the year-over-year, be that, that a quarter, such control. hoping that we've point, we to step-down back this reduction can't we magnitude. half have Chinese decline, kind with plans would moderates that are and of something we're see frankly third in But we our We realistically being because believe overly Now second not tourism to that which us, continuing rate that once we hard the seen at a of upon practically, is swift it to get hoping predicated coming tourism, optimistic.

first the which the we when three push we wholesale As reprocess rough those the what sale there overly for in diamonds, sometimes get We One was the though predictive think be about was get gross of really Tiffany quality. them not to happened quarter, back really boxes and out margin, of. you factors. in, can't

quarter half we negative some saw to factory sales on up also ramping the would back the our But second things, for for expect expect We year second so. certainly or our when half costs. much launches I to leverage fixed balanced. more by continue product loads of we're be another that and

So quarter. additional point is the was temporary concerned, a that mix should probably the the far day as first higher items that for kind us. phenomenon. of a the of that's we a then fact the really And of be we price in talked sold good as thing lot about at end And

think we full a tough. knew be as the So the basis, on year half margin first about we would

to ground up expect in make We the second half.

so on settles up And the dust the year to we today. to margin be would slightly out flat maybe given, here we've as full guidance based sit expect the when we operating on

Operator

comes Our Group. Telsey from from question Telsey Advisory next Dana

Dana Telsey

best Mark, what luck, a the years. over pleasure all And of

see As you on the investments SG&A you when during guidance, being the introductions, about year we and commented the cadence think think about margin, of them? do you the year, and are just as And the the made? product that given for new how management should also expense gross just guidance

Mark Erceg

sure did let we're the we've we on so you investments really see growing take about. continue money sales can But cost new which Alex the drive of that first And that to in tight a excited be really was the that comment expense I'll quarter as in programs far the the that as expect results SG&A fuel our the hold. very you is will I initiatives, the initiatives can fact and that on very doing day. growth to other continue that that that's the look entire management, are things only business. to restrained. the hard additional throughout But work end hope past make as reins at the would spending testament procurement organization through there year as on to in we discussed I the growth

Alessandro Bogliolo

things And And which we we True of we have is that Tiffany part they're, and Because the doing have. the starting plans we what foremost, pursuing in year, will Yes. been then most first in been has have the terms last started on the the keep products, strategy for of second to year. FLOWERS platinum, platinum from and in launch, important and T PAPER to jewelry gold. in gold

We accelerated gold, will introducing mainly continue with very of this pace. approach newness, in at a

seeing newness And is far, it from results, higher the the if are the even in in newness only growth the the X gold. revenues so comes higher performance. the And we and year, from especially price, that our in the

So foreseen and the gold average of We in precious and term. for value we strategy. the short the categories. brand in increasing also is that this we Tiffany the And we seeing strategy that the same term out clearing, in for taken find long is second definitely have performance we if the have and this anybody the it strong has the because transaction this, brand year positive part a more luxury very the doubt reinforcing the are brand, for and reassuring clearing believe a continue launches and

Operator

from Suisse. comes from Michael Credit Our Binetti next question

Michael Binetti

wanted ask, it to add me think -- about quarter, you stepped trying up in how year. your the to you last XQ. it as this and my of cost SG&A, I -- years. on I that you'll let And And just XQ cadence and now the talked Mark, over just the you I help anniversary But thank the mentioned this wanted I'm quarter. about managing year think in both second all you for so looks to congrats

lever So forward of the second half you support low that this you're I do to maybe components are to the algorithm what any think next out pipeline? acceleration as next comp to that could just us are into had And connect to that XXXX? remind that allowing trying SG&A as this go the the innovation then to we a SG&A around comp we about those year, year on be Mark, year. you back to single-digit guess perhaps out looking pushed think year was to And of the

Mark Erceg

Yes. the you question. for Thank

the when So really in portion profile, last you investment second quarter. with started it stepping up of our the was about first respect you asked, year, what when think to we spending principally

lap [indiscernible] So prepared or remarks we second to a global that. our this Alex little of charges sites. really maybe quarter? our commented in the costs we marketing the that there said any annualize third investments toward e-commerce-enabled up [Indiscernible] and quarter were slipped needed or XX year quarter elements we or that digital bit And in first about as stood

in-store the So think push. that rate arguably forward, was say it would marketing And grow QX elevated stepped already run from will a this to from far little I you're year. balance the bit the point think amount support, a up of of [indiscernible], the sustainably be From through we point, constant I going see and as as to then order that spending, steady business. in is the and spending appropriate we fairly of investment

of most now is which at us, that important. So is point, I this behind think

As we concerned, that felt efforts as would with cost [indiscernible] are that. I however, the far takeout tell think you respect I to

to before The that. and continue in jewelry the We're up of source-to-pay relates talked the our we which something group speak, tracking great standing good work in global of side it's to as group bring But [indiscernible] over to the The advanced design really inventory project do group managing It the the our our participation. point year just scorecards and design allow point time. took intervention, suppliers has and will in about on and us They mean into all I levels. we've global together as This and do diligent work. this lot loads and a spreadsheets doing system modeling. the about it more up we prepared procurement supplier time our with place, I engineering putting Excel a capacity well enablement a pools, multifunctional spanned we a It's supplier been manufacturing of system [indiscernible] planning optimize is better network. to let been us do innovation of which we has a factory haven't going workshop was them lot around a where give up to decisions. doing a frankly, make had of us they to for make-versus-buy going spend across visibility in number We're to that allows planning. multimillion-dollar the to house. to our lot allow to been much production this enable stood up mentioned a us remarks costing, our [indiscernible], [indiscernible] more sophisticated will on years.

be the to able detail scheduling are do for to things big our us. vendors, mass facilities for types of each across enablers production manufacturer, So those and rescheduling

should you we're that So go that But I on. I working could things against. sense think the give some of

Operator

We question take will our from now from Oppenheimer. Nagel next Brian

David Bellinger

for It's Brian. David on Bellinger

foreign last all, in First of estimated the speak saw thanks the tracked I -- lower levels. down later the trend to is tell you the for throughout year's everything, to follow what stages seeing And indications can all the so XXXX? on QX? there that we your just weaker you're your the to sales any us Are much of QX how around figure of XX% tourists, Mark. how there stabilization business? you wanted up from years. Appreciate help over Can versus

Mark Erceg

And quarter the the first fourth that June what point experienced since decline sharp for we in last we of of itself in time of we year quarter tourists retail was down we we in significantly year. saw the the of really have been third the running guess saw extreme as presented say would is first that the well in Chinese I U.S. what reduction That time. said, quarter as last the more year. even in than last

the we there, we're if start lapping good that up So is come to period. any, upon fact trying news base should the is least in there at the when

that's as to continued tourism is again other concerned, in that quarter. fourth And the fall has as far the As well. that, mentioned I going off

work some data. to of this again internal From standpoint, It's that third to Within quarter anything is this. a validate our really the an not I'm do. all itself, fully sourcing. we estimation there's month-to-month hesitant party about say is internal because This

I we But to it's accurate. read good, much month-to-month. So believe want wouldn't

more think the probably relevant. are trends I quarter-to-quarter

Alessandro Bogliolo

Yes.

consumer trends from But read X-, our of Sort can one a these XX-month X-, not basis. It's that actually market part another. are be of because one on business. [indiscernible] to

So I relevant mean it's [indiscernible], I mean I really a monthly don't basis. think on

Operator

JJK Our from comes Janet Kloppenburg Research. next question from

Janet Kloppenburg

so you really thank miss I'm to much And you. to going Mark.

Engagement Lots Fashion standards for You Jewelry I of we're luck, a investor changed of the benefiting the couple breakdown business. had from all and on the questions of and that. Mark. relations

I was on e-com. I think be us quarter those quarter? their first the in It Mark, wondered help deceleration was sounds SG&A. for And you could quarter. some there if the categories second fourth about there relating thinking expense like here the How the a And the just in quarter. the increase to in should SG&A cutback rate in of we marketing about first in of performance

Alessandro Bogliolo

you, Janet. Thank

your to categories. answer question first will about the So I product

Collections, reported had Jewelry we performance. exchange in X exchange a plus X% plus constant -- basis rate rate exchange -- So

in we performance I Collections, have before, seen most iconic most said Now precious strong newest, Jewelry our lines. and a as

X% while on the expensive of course, of this assortment. products silver, X% strong and, items in less Of that were also older But our I'm course, negative actually some the have for the lines is that for growth the it's low me strong and very of single very is made digit, a may important average in which just for, future. the strategically, in we invested growth seem --

is that strategically very me, for So important.

flattish X% actually Engagement in it's kind a -- The a situation. Jewelry, of it's bit negative little

that last year XX% was also We astonishing year. XX%, last engagement and plus grew to rate constant exchange we are at we to that when comparing have remember

performance. So I it see as

consider have markets T carats. the of yet carats higher that in True is in now, True. launch benefited T time But the We of not in the ring and being, out rolled smaller for engagement the

its been full the but our by reception very expectations, And potential. product in the the is yet in market So has it's line positive. not with

Mark Erceg

to it just question, bit just about I marketing can and more maybe is your broadly. answer asking [indiscernible] little [Indiscernible] a progression. And [indiscernible]

[indiscernible] imply a provided expect to of be accretive as Within on the we flat as year-over-year. margin line, suggest will line percentage you think inclusive or we flat I would year-over-year. tell that, of the you maybe on well If expense, what the about roughly slightly marketing it guidance be marketing that is both sales, would bottom op top as and SG&A

between not divergence overall above slightly flat to the those a really there's within lines So two margin.

Operator

Our next question JPMorgan. comes from from Boss Matthew

Matthew Boss

region? So consumer brand here level, the you maybe impact strengths do, in maybe from the if the in by Particularly the China? local but higher you not U.S. that what mentioned seeing engagement tourism, driver what's and with are on and mainland exclude of I customers view from you know to probably your the easy

Alessandro Bogliolo

question. for you, Thank Matt, your

strongest that had positive mainland And about we because that, to but difficulties also customers. customers. driven in in actually has affected definitely notably performance one domestic been continent for other The -- negatively talking have have performance the by have positive say So in all Europe, Europe, been the local component. China also has, of France a there, that And tourist I seen markets, across seen geographies. totally pretty customers, we spite that China also

cetera. example, I'm like Now campaign, factors. the my the et I carpet, the engagement Kendall in models, Argañaraz, of social are initiative, Murphy, the remarks, new engagement, Jenner, for underscored where It Mica in also mostly other I how -- This Gaga red of is we at well-known using media. terms Lady is advertising prepared why the Carolyn and looking on very

by is in seeing customers. we media social increase on are Tiffany What for an engagement enormous

the it with increase this connection the of brand future. of in the sales of But sure, far being it's comes reassuring to from local very Now and the relevance is assurance for customers. when an near

what But really look is taken terms was media, So really performance and fundamentals customers have engagement we with than said, results social at achieved. of slightly of course, the strategy. that I reassured that as I'm if about I products higher-priced domestic the in expecting have we direction is I better and on gold

Matthew Boss

relative just if whole, guess consumer you I guess as the overall a as abroad follow-up Great. that as to Chinese consumer that, the mentioned, Chinese total the previous to on spending on domestic a your And well I quarters? then what's spending in view we put just the together

Alessandro Bogliolo

in a and in Well, high a growth performance, rest. mainland mix China the strong sharper decrease of it's a in very

the are few mix of we quarters X/X sales in were sales seeing mainland what the world. So because Chinese actually shifting of ago, Chinese typically rest customers a is to our China, of the a split in of X/X

Chinese Now U.S., gone the Kong, Hong China has to of in about sales cetera, to including mainland down the to et XX%. increased and components XX% mainland China, outside has

Operator

Our from from question Cowen Oliver next comes Chen Company. and

Oliver Chen

Mark. best Thanks And regards, welcome, help, all your and for Jason.

our I Regarding the you margin a what opportunity? improve dissecting Just of on good for competitors the are a the supply lot business to shows mix, cost love buckets like-for-like fixed around angle chain and mix, you are would changes? comp and business within leverage long-term from on basis, a lot operating overall analysis the to long-term relative and of that thinking guess also points of your on thoughts opportunity. margin. Just opportunity color

Mark Erceg

expected the this that, last we Look, our occur. reduction we still had maybe we could tourism, number making about it But we're slightly effectively be hopeful after operating up. now could the strong initially fiscal, investment of year. this in flat, saying a step-up to And expand that margin We're big that with times. talked stated

believe top look per a points consistent past would to efforts temporal line time should roughly we our move current management and are through over we be effects and XX the cost fashion, gains business, year through try -- affecting and past more still are annum, place. to all able these If the that of basis in you us a extract get obviously much that better and that you confident and margin growing the

I that as simply growth limited have effects overly now we available long-term of seeing don't right say we time the with temporal by So algorithm, it we're specific particular. changed call, in our having without tourism getting been in view amount these the would for that this

Operator

from comes Markets. KeyBanc Capital question next Our Edward from Yruma

Edward Yruma

all thanks help the Mark, the for over years.

for You've quick in understanding helpful the me. guess been story. just ones I two incredibly

results negative seeing Are social any And First, but days, perception you you problem I have American on e-com? in China. on then a that an good said mainland brand? with I know second, know anything But Tiffany going being you early could on forward? initial had would you diamonds it's media indicate any reads

Alessandro Bogliolo

Thank you, Ed, for your questions.

in you're the The to in give first being one, rings to order I first the to offer in our say e-commerce, information that online foremost, right, our time very has for decided we to why But on diamond reason the early. it's have diamonds U.S. been, website customers. and

the decision-making. an and what to is crucial helps terms X, for has purchase on and completing that clarity important of now the at we decision-making of X in go difference before of our research ability carat, we Tiffany the customer And the completed an the believe website the take understand know store. a least several engagement the it's in is typically out a on purchase. ring steps, a color, that is But we interactions Because that purchase typically, -- with price lot that

the me sales We online. is measure not have stores. is final success. of for in information and our better diamonds But some sold better success that already of measure The

question... second the Now

Mark Aaron

perception. Negative

Alessandro Bogliolo

Tiffany consumers I the that negative not in any are we experiencing say negative have towards Chinese of sentiment perception China, brand. The to by

VIP authorities strongly, exchange increase transferred and see consumption. VIP And in we in consumers. in are this the have we accordingly, if to very China, China have the in –abroad decreased Don't decreased but are softness For in it's that Chinese price also out recollection forget to order sales to totally sure making not because period local that also we decrease push to has rates in China. our sales of in increasing tourists, linked even where also to the a our

our any experiencing brand absolutely, and sentiment we against America. that not North definitely are So is

Operator

Walvis Sachs. comes Our Alexandra question next Goldman from from

Alexandra Walvis

my inventory. thanks also add to My Mark question I'll is on your the all for support.

was of a quarter. bit there was sales So this growth mentioned you build versus a where

rationalization that a strategy high You the there still for -- today? mentioned of build? that inventory stores? in longer-term help Is opportunity And in how are about if some inventory the from holiday pieces? build you break those an are from season. so, you impact your build to us Where to was worked as and jewelry two high down that jewelry thinking we the you through can excess And in

Mark Erceg

did jewelry investment based begin. a public very on were and right. we That's you're annualized purchases that yet And fully question. we about the high great when The made hasn't

planning of disappointment and is the settles of of we course, internal rapidly during balances to expecting have dust otherwise still XX, our projections higher would and slight than frankly inventories a on so top that the with quarter. XXXX. all our And targeting did when the closely softer said, have component And year-over-year January growth a falling billing have worked tourism on We That it. ended off out into flat have then very holiday So are sales teams. line because up the preferred. and of we little we we

Operator

comes question next from go Saad Our from ISI. ahead. Omar Evercore Please

Omar Saad

which business, could talk your we more can give see Jewelry us in last the you a hoping There's for it initiatives Fashion engagement businesses you pretty this about was been that innovation big could maybe initiatives could in for scalable since and holiday. newness company. the like some I ideas statement Fashion But be and spring what around the year. Jewelry seems over opportunity

Alessandro Bogliolo

Omar. you, Thank

of second I for part part robust say a but we have pipeline products. pretty year, of would the first also next new of the for the year, so And

T, At and about very there where you be are that that can doing. like are the I are We can sales also lines in other have of I be for on in segments opportunity some totally will constant get they're to as And to Tiffany see you same lines. introductions. pleased flat. other, that like me soon will basically we not the closer newness terms response imagine effective. -- about some that of very at the there be injecting frustration we But very brand very because the confident focus huge It's rates by launch a to will probably side, very, are part the are will time, we these existing me going date, I but share new year and as accretive. customers for in to specific let the positive work meaningful you, a which of these where And good we believe second on hear lines, of feel sense is this iconic sales the we is very positioning say, being some

the a keep assortment reason newness. we is to this, a tourism have and the adding modify, to on is aside takes it that, factor brand there let's And and Tiffany, of like going evolve all Now the that to time.

and We back. leaves the customer of front are seeing that newness existing the newness newness in is aside paying of prefers But the course, products. the

in in So there is time are limits this. to -- a the we order the creating customer that mass lines customer. that new than in is without will introduce see the critical working very that it to the But now. are are [indiscernible] reach have the an required you, newness in -- market order give in and wider not Thank to just we marketing stores is And about option really to fast is the we Omar. but also in not about our manufacturing

Mark Aaron

now a.m. X:XX it's Operator,

decided in you months Jason see on role the hope Wong, But to consolidate Q&A ending you to So colleague, And leaving words think I treasury meetings up of a everyone's IR has in recently this we later session. IR and call, share. two will functions. at a wrap to Treasurer, interest as of you time, Tiffany the my Jason all company know, the to and and as year and to I introduce the transitioning be Tiffany's the before the the now result, few X. I will conferences. August to Jason and many next

Jason Wong

over security informed me free comprehensive, turn to that selected feel add with to now And keep analysts Mark for shoes I'll maintaining look closely my function Mark along the I and big financial I'm fill working smooth Mark. the Aaron communications following years Please the And to I Tiffany's together Tiffany. community. honored to incredible jason.wong@tiffany.com. to back Mark's reputation responsibilities. to about working to are call at with Tiffany's I Thanks, investors a and ensure clear, and forward have I'm we incredible at products. transition. been business Erceg, IR have our we so to consistent, to know committed can everyone to XX contact Mark.

Mark Aaron

In want support and do, closing, to your we've IPO Jason. interest of Thanks, I'm I that sure company. appreciate our engaging dialogues thank great following look XXXX forward, built. to this and relationships Tiffany as call I for productive many in And of we had. the since the the have on and the progress you you of for personally I

conclude these Jason the feel host its on additional with expects Tiffany conference we XX, on that quarter free the For results. now, to calendars now me can any please and call. a second report note opens, and Operator, comments before we'll Wednesday, about results questions market your call. contact August Please or to

Operator

Ladies and Thank for call. you today's gentlemen, concludes participation. your conference all this

You now disconnect. may

Tiffany & Co (TIF) 4 Jun 192019 Q1 Earnings call transcript