Tiffany & Co. (NYSE: TIF)

Tiffany & Co. (NYSE: TIF) newly declared fiscal results for the 3.0-months (“3rd-quarter”) and 9.0-months (“year-to-date”) finished October 31, 2k19. Worldwide net sales for the 3rd-quarter were unchanged from the previous year and declined 2.0 percent in the year-to-date duration.

In the 3rd-quarter:

  • Worldwide net sales of $1.00B and comparable sales were unchanged from the previous year; on a constant-exchange-rate basis, net sales and comparable sales inclined 1.0 percent from the previous year.
    • Worldwide net sales and comparable sales, excluding the Hong Kong market in both years, inclined by 4.0 percent and 3.0 percent, respectively, from the previous year. The effect of foreign currency translation was not significant.
  • Net earnings of $78.00M were 17.00 percent lower than the previous year’s $95.00M, and net earnings for each diluted share were $0.650 versus $0.770 in the previous year.

In the year-to-date:

  • Worldwide net sales declined 2.0 percent to $3.10B and comparable sales declined 3.0 percent from the prior year; on a constant-exchange-rate basis, net sales were unchanged from the previous year and comparable sales declined 1.0 percent.
  • Net earnings of $340.00M were 11.00 percent lower than the previous year’s $382.00M, and net earnings for each diluted share were $2.800 versus $3.080 in the previous year.

Net sales by region were as follows:

  • In the Americas, total net sales declined 4.0 percent in both the 3rd-quarter and the year-to-date, to $423.00M and $1.30B, respectively; comparable sales declined 4.0 percent in the 3rd-quarter and 5.0 percent in the year-to-date. Sales declined across most of the region, and management attributed that decline to lower spending by foreign tourists and, to a lesser extent, local customers. On a constant-exchange-rate basis, total sales and comparable sales both declined 4.0 percent in the 3rd-quarter and year-to-date.
  • In Asia-Pacific, total net sales were unchanged in the 3rd-quarter and declined 1.0 percent in the year-to-date, to $294.00M and $916.00M, respectively, which included comparable sales declines of 2.0 percent in the 3rd-quarter and 3.0 percent in the year-to-date. Management attributed the decline in sales in both durations to the effect of foreign currency translation. On a constant-exchange-rate basis, total sales inclined 3.0 percent in both the 3rd-quarter and year-to-date, while comparable sales inclined 1.0 percent for both durations as compared to the previous year. Sales performance in both durations reflected the double-digit growth in the Chinese Mainland, significant disruptions in Hong Kong beginning earlier this year and mixed performance in other markets in the region. Management also attributed these sales results to higher spending by local customers largely offset by lower spending by foreign tourists.
  • In Japan, total net sales inclined 19.00 percent in the 3rd-quarter and 5.0 percent in the year-to-date, to $169.00M and $469.00M, respectively; comparable sales inclined 19.00 percent and 4.0 percent for those similar durations, respectively. On a constant-exchange-rate basis, total sales inclined 14.00 percent in the 3rd-quarter and 4.0 percent in the year-to-date, and comparable sales inclined 14.00 percent and 3.0 percent respectively. Management believes that strong sales growth in the quarter previous to October 1, 2k19 reflected the Japanese consumers’ response to the incline in Japan’s consumption tax that took effect on that date.
  • In Europe, total net sales declined 3.0 percent in the 3rd-quarter and 4.0 percent in the year-to-date, to $111.00M and $330.00M, respectively, and comparable sales were unchanged in the 3rd-quarter and declined 4.0 percent in the year-to-date. Management attributed these changes to the effect of foreign currency translation. On a constant-exchange-rate basis, total sales inclined 1.0 percent in both the 3rd-quarter and the year-to-date; comparable sales inclined 4.0 percent and 1.0 percent, respectively.
  • Other net sales declined 13.00 percent to $17.00M in the 3rd-quarter and inclined by 2.0 percent in the year-to-date to $67M. Comparable sales declined 3.0 percent and 17.00 percent in the 3rd-quarter and the year-to-date, respectively.
  • Tiffany has opened five Company-operated stores in the year-to-date and closed three. At October 31, 2k19, the Company operated 323 stores (124 in the Americas, 90 in Asia-Pacific, 56 in Japan, 48 in Europe, and five in the UAE).
  • Sales for jewelry categories in the 3rd-quarter and year-to-date were as follows: Jewelry Collections was unchanged for both durations; Engagement Jewelry was unchanged and declined 3.0 percent, respectively; and Designer Jewelry inclined 1.0 percent and declined 8.0 percent, respectively.

Other highlights:

  • Gross margin (gross profit as a percentage of net sales) of 61.70 percent in the 3rd-quarter and 62.10 percent in the year-to-date declined as compared to 62.20 percent and 63.10 percent in the respective prior year durations. The decline in both durations is primarily attributable to a shift in sales mix toward higher price point jewelry, as well as the unfavourable effect from an incline in wholesale sales of diamonds in the year-to-date.
  • Selling, general and administrative (“SG&A”) costs inclined 1.0 percent in the 3rd-quarter and declined 1.0 percent in the year-to-date. These changes reflected an incline in store occupancy and depreciation costs offset by a decline in labor and incentive compensation costs and marketing spending.
  • Earnings from operations as a percentage of net sales (“operating margin”) was 11.70 percent in the 3rd-quarter and 15.10 percent in the year-to-date, compared with 12.50 percent and 16.70 percent in the respective previous year durations.
  • The effective income tax rate for the 3rd-quarter of 2k19 was 25.40 percent versus 17.10 percent in the prior year. The effective income tax rate for the year-to-date of 2k19 was 21.30 percent versus 21.60 percent in the previous year. The effective income tax rate in the 3rd-quarter and year-to-date was inclined by an income tax cost of $5.80M, or 550.0 basis points and 130.0 basis points, respectively, due to a change in the estimated Foreign Derived Intangible Income (“FDII”) benefit for fiscal 2k19. The effective income tax rate in the year-to-date of 2k19 also included the recognition of an income tax benefit of $7.50M, or 170.0 basis points, related to an incline in the estimated 2k18 FDII benefit as a result of U.S. Treasury guidance issued throughout the 1st-quarter of 2k19. The effective income tax rate in the 3rd-quarter and year-to-date of 2k18 was reduced by 380.0 basis points and 90.0 basis points, respectively, as a result of the true-up of $4.40M of the Company’s prior year tax provision in conjunction with the filing of the 2k17 tax returns. The effective income tax rate in the year-to-date of 2k18 also included the recognition of an income tax benefit of $8.0M, or 160.0 basis points, primarily as a result of a decline in the gross amount of unrecognized tax benefits and accrued interest and penalties related thereto due to a lapse in a statute of limitations.
  • The Company repurchased approximately 883,000 shares of its Common Stock in the 3rd-quarter at a total cost of $78.0M and an average cost of approximately $88.00 for each share. The Company repurchased approximately 1.790M shares of its Common Stock in the year-to-date at a total cost of $163.40M and an average cost of approximately $91.00 for each share.
  • Net inventories at October 31, 2k19 were 4.0 percent above the previous year.
  • At October 31, 2k19, cash and cash equivalents and short-term investments totalled $530.00M. Total debt (short-term borrowings and long-term debt) of $974.00M represented 31.00 percent of stockholders’ equity, which is the similar as a year ago.