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RAPAPORT... Tiffany & Co. reported that revenue rose 4.4 percent year on year to $925.9 million in the second quarter that ended on July 31. Comparable-store sales rose 1 percent worldwide. Cost of sales rose by only 1.6 percent to $393.8 million and gross margin as a percentage of sales increased to 57.5 percent from 56.3 percent one year ago in large part due to diminishing product costs. Profit jumped 16.3 percent to $106.8 million or 83 cents per diluted share.
By region and measured by growth at constant-exchange rates, revenue improved 2 percent to $444 million across the Americas; however, same-store sales were flat. In the Asia-Pacific, sales jumped 20 percent to $208 million and comparable-store sales rose 13 percent, while revenue and same-store sales rose 7 percent to $136 million in Japan. Meanwhile, Europe recorded a revenue increase of 10 percent to $111 million and same-store sales rose 7 percent. Tiffany & Co. reported that a stronger dollar had a negative currency translation of 4 percent worldwide, which was driven by a 21 percent contraction effect from sales in Japan.
Other sales increased 33 percent to $26 million in the second quarter, primarily reflecting the conversion in July 2012 of five Tiffany & Co. stores in the United Arab Emirates (UAE) from independently-operated to company-operated.
As of July 31, Tiffany & Co. recorded inventory of $2.3 billion, which was up 4 percent from one year ago. Finished goods inventories rose to support new stores and expanded product assortments, while combined raw material and work-in-process inventories declined slightly. Net inventory rose 7 percent on a constant-exchange-rate basis.
Tiffany opened three stores in the second quarter in Hong Kong, Verona, Italy and Villahermosa, Mexico and closed one in Tokyo, Japan. Tiffany operates 277 stores (116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and five in the UAE), compared with 260 stores one year ago.
Michael J. Kowalski, the CEO of Tiffany & Co., said, “Total sales growth met our objective due to solid performance in most regions and with particular strength in our statement and fine jewelry product categories. We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin. We are pleased to have achieved healthy earnings growth in the first half of the year. Looking forward, we are equally excited about the initiatives we are pursuing in product development, marketing communications and store expansion, all intended to further enhance Tiffany’s strong brand position and take fuller advantage of its long-term growth opportunities in the global luxury market.”
Tiffany improved guidance for the fiscal year that ends on January 31, 2014 to forecast net earnings in the range of $3.50 to $3.60 per diluted share, compared with an earlier prediction of $3.43 to $3.53 per diluted share. The retailer anticipates worldwide net sales to increase by a mid-single-digit percentage in dollars. It is also adding 14 company-operated stores with six in the Americas, seven in Asia-Pacific and three in Europe and closing one each in Asia-Pacific and Japan.
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