Tiffany Q4 and 2005 Net Earnings Decline

Tiffany reported today that net sales for the fourth quarter of 2005 rose 6 percent. Net sales for fiscal 2005 rose 9 percent. Though operating earnings increased by 44 percent and 30 percent respectively, net earnings declined in both periods.

In the fourth quarter of fiscal 2005, net sales rose from $810,122,000 to $858,446,000. Net earnings were $140,257,000 compared to $217,040,000 in 2004.

In fiscal 2005, net sales rose to $2,395,153,000 from $2,204,831,000. Net earnings for the year were $254,655,000 compared with $304,299,000 in the prior year.

U.S. retail sales in the fourth quarter increased 8 percent to $449,339,000, largely due to 5 percent comparable store sales growth (branch store sales increased 7 percent and flagship New York store sales declined 2 percent). In 2005, U.S. retail sales rose 9 percent to $1,220,683,000, with comparable store sales increasing 7 percent (branch store sales rose 7 percent and New York flagship store sales rose 5 percent).

International retail sales rose 1 percent to $303,982,000 in the fourth quarter and 5 percent to $900,689,000 in 2005. Sales rose 10 percent in the fourth quarter and 7 percent in the year, partly due to retail sales increases of 8 percent and 4 percent in Japan.

On the same basis, international comparable store sales rose 7 percent in the quarter and 2 percent in the year and by region: Japan increased 7 percent in the quarter and were unchanged in the year; the Asia-Pacific region outside Japan rose 13 percent and 8 percent; and Europe increased 1 percent and 1 percent. During the year, new retail locations were opened in Japan (two), Australia and France, while five in Japan were closed. The company operated 95 international stores and boutiques at year-end.

Other sales increased 11 percent to $34,240,000 in the fourth quarter and rose 32 percent to $116,298,000 in the year, primarily due to increased wholesale sales of diamonds. Contributing to sales growth were six Iridesse stores, which focus on the pearl jewelry category. Sales in Little Switzerland stores decreased 4 percent in the quarter and increased 7 percent in the year.

Michael J. Kowalski, chairman and CEO, said in a release, "We are pleased with Tiffany's overall success in 2005."

According to Kowalski, in 2006, the company is expecting an approximately 10 percent growth in net sales and at least a 12 percent growth in earning before income taxes. "Our full year sales objective assumes mid-single-digit worldwide comparable store sales growth on a constant-exchange-rate basis, including a high-single-digit increase in the U.S. and low-single-digit growth in local currency in Japan, as well as healthy sales growth in other markets, and opening at least four stores in the U.S. and seven stores (net of closings) internationally."

In terms of the first quarter, Kowalski added, "We have had stronger-than-expected comparable store sales growth in most international markets, including double-digit growth in Japan. U.S. comparable store sales have been modestly below the prior year, reflecting a difficult year-over-year comparison."