Tiffany’s Q1 Net Earnings Rise 8%

Tiffany & Co. yesterday reported increases in net sales and net earnings for the fiscal quarter ended April 30, 2006. Results benefitted from international sales growth and a higher gross margin.

Net sales of $539,241,000 were 6 percent higher than $509,901,000 in the first quarter of 2005. On a constant-exchange-rate basis which excludes the effects of translating foreign-currency-denominated sales into U.S. dollars, net sales rose 9 percent and worldwide comparable store sales increased 5 percent.

Net earnings increased 8 percent to $43,142,000, from $40,058,000. Earnings in the first quarter of 2005 included a tax benefit of $1,500,000. Earnings before income taxes increased 13 percent.

Sales by channel of distribution were as follows:

• U.S. Retail sales increased 2 percent to $260,580,000 and comparable store sales declined 1 percent. Comparable branch store sales were equal to the prior year and sales in the New York flagship store declined 7 percent.
• International Retail sales, in U.S. dollars, increased 13 percent to $215,164,000. On a constant-exchange-rate basis, sales rose 21 percent due to 15 percent total retail sales growth in Japan and increases in other regions; on that same basis, comparable international store sales rose 16 percent due to increases of 12 percent in Japan, 20 percent in the Asia-Pacific region outside Japan and 24 percent in Europe.
• Direct Marketing sales rose 4 percent to $29,957,000 due to increases both in the number of orders shipped and the average order size.
• Other sales declined 4 percent to $33,540,000.

Michael J. Kowalski, chairman and chief executive officer, said, "We are very pleased with the geographically broad-based strength in our international stores and are encouraged with Tiffany's results in Japan. U.S. Retail sales results were disappointing, but it should be viewed relative to a strong 14 percent increase in last year's first quarter."

• Gross profit as a percentage of net sales was 55.8 percent in the first quarter, compared with 53.9 percent in the prior year. The increased margin primarily reflected favorable product sales mix, as well as some benefit from geographical sales mix. Sharply higher precious metal and diamond costs continue to pressure gross margin, although the Company periodically adjusts retail prices to mitigate such effects.