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Tiffany's 4Q Sales +4%, Earnings +1% as Costs Pressure Margins

U.S. Comparable-Store Sales Decline
Mar 22, 2013 8:55 AM   By Jeff Miller
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RAPAPORT... Tiffany & Co. reported that sales increased 4 percent year on year to $1.24 billion for the fourth quarter that ended on January 31, while its same-store sales were flat. Internet and catalog sales rose 6 percent. Cost of sales rose more than 7 percent to $505 million pressuring the gross margin down to 59.1 percent from 60.4 percent one year earlier.  Earnings improved just slightly, by 0.7 percent year on year, to $179.6 million or $1.40 per diluted share.

By region, Tiffany's sales in the Americas rose 2 percent year on year to $620 million; however, same-store sales fell 2 percent and the retailer's comparable-store sales at its New York flagship store declined 3 percent. tiffany gross margin

Across the Asia-Pacific region, total sales rose 13 percent to $254 million, with strong performance from China, and comparable-store sales increased 6 percent. Sales in Japan fell 6 percent to $192 million; however, same-store sales rose 2 percent.

In Europe, Tiffany's sales rose 3 percent year on year to $146 million in the fourth quarter but same-store sales were flat.

Tiffany noted that sales doubled in other regions to $24 million with strong performance from its  United Arab Emirates (UAE) boutiques.

Fiscal year sales also rose 4 percent year on year to $3.79 billion, while cost of sales jumped better than 9 percent to $1.63 billion. Earnings for the year fell 5 percent to $416.2 million or $3.25 per diluted share. Sales in the Americas rose 2 percent to $1.8 billion, but again same-store sales were down 2 percent, while sales in the Asia-Pacific region powered ahead by 8 percent to $810 million and yet comparable-store sales rose by only 2 percent. Japan's regional sale rose 4 percent to $639 million, while same-store sales jumped  7 percent.

In Europe, Tiffany's fiscal year sales improved 11 percent to $432 million and comparable-store sales increased 2 percent.

During the year, Tiffany added 28 company-operated stores with 13 in the Americas, including four in the U.S., six in Canada, two in Mexico and one in Brazil; eight store were added in the Asia-Pacific including six in China, one in Australia and one in Singapore; two stores were added in Europe including one in France and one in the Czech Republic. Tiffany added five stores in the UAE.

Fiscal year gross margin fell to 57 percent from 59 percent and largely reflected pressure from higher precious metals and diamond costs, according to the company. Additionally, margins came under stress from a shift in the sales mix to higher-priced products in the stores and reduced sales leverage on fixed costs. Increased average borrowing levels resulted in higher interest expenses, and the effective income tax rate  of 35.3 percent was up from 34 percent one year ago. Tiffany held cash and cash equivalents of $505 million at the close of its fiscal year, up from $434 million, and the company's debt was $959 million compared with  $712 million one year earlier. Inventory levels rose 8 percent year on year to $2.2 billion.

Michael J. Kowalski, the CEO of Tiffany & Co., said that the fourth quarter results were ''consistent'' with the company's Christmas-season expectations. ''While financial results in fiscal 2012 were disappointing due to lower-than-expected sales growth and pressures on gross margin, we continued to maintain a longer-term focus on strengthening global awareness of the Tiffany & Co.  brand and on further developing compelling product offerings. We will be pursuing important growth opportunities in 2013, with plans including exciting new jewelry collections, enhanced customer communications through print and digital media and expansion of our global base with additional stores. Tiffany is well positioned to achieve net earnings growth of 6 percent to 9 percent and healthy free cash flow.''

Tiffany's guidance for the current fiscal year anticipates worldwide sales growth of 6 percent to 8 percent in U.S dollars, with the strongest performance in the Asia-Pacific region. The company expects earnings in the range of $3.43 to $3.53 per diluted share. Tiffany plans to increase its inventory level by 5 percent.
 

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Tags: Asia-Pacific, earnings, gross margin, inventory, Jeff Miller, sales, Tiffany
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Apr 15, 2013 10:11AM    By Timmy John
It would make sense that Asia is picking up this whole sector, like Dillinger with banks, its where the money is at http://www.dallasnews.com/business/headlines/20100510-Zale-s-unveils-restructuring-plan-to-1350.ece
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