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Tiffany & Co.'s FY Revenue +6%, Profit -56% to $181M

Mar 21, 2014 8:34 AM   By Jeff Miller
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RAPAPORT... Tiffany & Co.'s worldwide sales rose 5 percent year on year to  $1.298 billion and same-store sales improved 2 percent for the fourth quarter that ended on January 31. The retailer's  cost of sales increased 1.6 percent to $513 million; however, Tiffany & Co. recorded an arbitration expense of $480 million, which led to  reporting a quarterly loss of $104 million compared with earnings of $180 million one year ago.

For the retailer's fiscal year, revenue increased 6.2 percent year on year to $4.031 billion, comparable-store sales increased 3 percent, cost of sales rose 3.7 percent to $1.691 billion and profit slipped 56.4 percent to $181 million or $1.41 per share. 

During the fourth quarter, which included the all-important Christmas season, comparable-store sales on a constant-exchange-rate-basis and by region were strongest in Japan, where they improved 8 percent, followed by an increase of 7 percent in the Americas, 4 percent in Asia-Pacific and 2 percent in Europe. For the full year, same-store sales on a constant exchange-rate-basis rose 11 percent in Asia-Pacific, improved 10 percent in Japan, increased 4 percent in Europe and 3 percent in the Americas.

Tiffany & Co. reported that gross margin as a percentage of net sales increased 1.4 points to 60.5 percent in the fourth quarter and it rose 1.1 points to 58.1 percent for the full year. Gross margin in both periods largely benefited from reduced product cost pressures, as well as price increases taken earlier in the year. In addition, a shift in the  sales mix toward higher-priced, lower-gross margin products offset some of those benefits.

The value of Tiffany & Co.'s inventory increased 4 percent year on year to  $2.3 billion as of January 31.  Finished goods inventory and combined raw material and work-in-progress inventory increased at similar rates, according to the retailer

Michael J. Kowalski, the CEO of Tiffany & Co., said, "We are proud of our performance this past year. Sales and operating earnings (excluding the arbitration-related charge) rose to record levels. Sales growth was led by fine and statement jewelry, new or expanded jewelry collections including the Atlas, Ziegfeld and Harmony collections and continuing strength in our iconic jewelry designs. Tiffany's marketing communications more effectively engaged global consumers wherever they shopped, our distribution network was expanded by 14 additional stores and everywhere the store experience was enhanced by improved visual merchandising. And we made important additions to our management team to strengthen our ability to capitalize on the global growth opportunities before us."

Looking ahead, Tiffany & Co. anticipates earnings in the rage of $4.05 to $4.15 per share in 2014 and worldwide net sales increasing by a high single-digit percentage rate. Tiffany & Co. is planning to add 13 company-operated stores and closing four existing stores. The retailer will open four boutiques in the Americas, five in Asia-Pacific, two in Japan and one each in Europe and Russia, while closing one store each in the Americas, Asia-Pacific, Japan and the United Arab Emirates. Tiffany expects to record an effective income tax rate of 35 percent, raise net inventory by 6 percent and increase its capital expenditures  to $270 million as it invests  in certain information technology systems.

Separately, Tiffany & Co.'s board approved  a new stock-repurchasing program, authorizing   up to $300 million toward buying the company's common stock through open market transactions. Stock purchases are discretionary and will be made from time to time based on market conditions. The new program expires on March 31, 2017.

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Tags: earnings, gross margin, income tax rate, inventory, Jeff Miller, outlook, Tiffany & CO.
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