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Tiffany & Co. 2Q Sales +31%, Profit +33% to $90M

Foreign Demand, Weaker Dollar Helps Improve Results

Aug 26, 2011 7:41 AM   By Jeff Miller
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RAPAPORT... Tiffany & Co. reported that second-quarter revenue rose 30.5 percent year on year to $872.7 million, while cost of sales increased by 27 percent to $358 million, for the three months that ended on July 31, 2011. Same-store sales rose 22 percent. Net earnings jumped 32.5 percent to $90 million.

By region, Tiffany & Co. reported a 25 percent year on year increase in sales for the Americas at $438.2 million and that comparable-store sales rose 23 percent. Sales from the New York flagship store, specifically, increased 41 percent in large part due to strong foreign tourist demand.

In the Asia-Pacific region, sales increased 55 percent to $173.2 million, while on a constant-exchange-rate basis, sales increased 45 percent. Tiffany & Co. reported growth in most countries with the largest increase in the greater China region. In Japan, sales rose 21 percent to $142.5 million, but on a constant-exchange-rate basis, total sales increased 8 percent.

Tiffany & Co. sales across Europe  increased 32 percent to $101.3 million. On a constant-exchange-rate basis, sales increased 17 percent.

Wholesale and ''other'' sales rose 46 percent to $17.4 million with stronger demand for finished products  partly offsetting  a decline in wholesale sales of rough diamonds.

Gross margin improved to  59 percent from  57.8 percent one year ago. Selling, general and administrative expenses rose substantially, as expected, due to  nonrecurring costs of $34 million in the second quarter and $43 million in the first half, primarily due to the relocation of Tiffany's New York headquarters.

Tiffany & Co. held a 31.2 percent income tax rate in second quarter, which was lower than the 34 percent rate reported one year ago. The retailer contributed the decline  primarily due to a reversal of a valuation allowance against certain deferred tax assets.  Tiffany & Co. held $565.2 million in cash and  cash equivalents on July 31, which was down from $614.7 million in 2010. However, Tiffany & Co. lowered its debt to 29 percent of stockholders' equity compared with 40 percent one year ago.

Tiffany & Co. has increased its inventory 18 percent year on year with nearly one-fourth of that increase resulted from the effect of translating stronger foreign currencies into U.S. dollars.

Michael J. Kowalski, the chairman of Tiffany & Co., said that such strong growth reflected the growing global appeal of Tiffany's product offerings. ''In addition, we have been able to absorb precious metal and gemstone cost increases while improving our gross and operating margins.

''Despite continuing economic uncertainty, our strong first-half performance gives us ample reason to remain confident about our prospects for the balance of the year. We are encouraged that total worldwide sales growth in the third quarter-to-date is continuing to exceed our expectations due to noteworthy strength in the Americas, Asia-Pacific and Japan, demonstrating, once again, the attraction of the Tiffany & Co. brand. We are increasing our full year earnings forecast to $3.65 to $3.75 per diluted share, not including nonrecurring expenses, from the previous forecast of $3.45 to $3.55 per diluted share due to the better-than-expected second quarter results."

Shares in Tiffany & Co. (TIF) topped $83 only weeks ago, but then, along with those of many other retailers, shares had fallen 33 percent by August 19. Still, at the market's close on August 25, TIF shares had increased 50 percent year on year to $63.11.


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Tags: diamonds, earnings, Jeff Miller, Jewelry, quarter, results, revenue, strong, Tiffany
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