Tiffany Q4 Net Sales Declined 20% to $841.2 Million

Tiffany & Co. reported on Monday a decline in fourth quarter earnings. Worldwide net sales declined 19 percent and comparable store sales declined 23 percent. Sales declines of 29 percent in the Americas were the most significant contributing factor to the company’s sales decline.

Fourth quarter net sales declined 20 percent to $841.2 million. On a GAAP-reported basis, net earnings in the fourth quarter were $31.1 million compared with the prior year's $127.4 million, a 75.6 percent drop.

Annually, net sales of $2.86 billion were 3 percent below the prior year. On a constant-exchange-rate basis, worldwide net sales and comparable store sales declined 4 percent and 9 percent. The full year's net earnings were $220.0 million versus $323.5 million in the prior year.

“Tiffany has clearly not been immune from global economic turmoil in recent months and we are taking a cautious view to business conditions in 2009,” said Michael J. Kowalski, chairman and chief executive officer. “We have addressed our cost structure in order to maintain reasonably healthy levels of profitability and strong liquidity, and position Tiffany for future growth.”

The company's earnings included pre-tax charges of $7.5 million due to inventory and other charges related to the closing of the IRIDESSE operations

In the fourth quarter, Tiffany offered an early-retirement package to approximately 800 U.S. employees and approximately 600 accepted the offer. Combined with additional staff reductions that were made and the anticipated closing of IRIDESSE stores, management expects to incur a reduction of 10 percent of worldwide staffing. This is expected to generate approximately $60 million of pre-tax savings in 2009, to be realized in selling, general and administrative expenses and in cost of sales.

In the Americas, fourth quarter sales of $458.9 million were 29 percent below the prior year and full year sales of $1.59 billion were 10 percent below the prior year. Comparable U.S. store sales declined 33 percent in the fourth quarter and 16 percent in the year. This included New York flagship store sales declines of 34 percent in the quarter and 9 percent in 2008.

“We have not yet seen signs of an upturn in our business with worldwide sales in the quarter-to-date declining more than 20 percent, which is in-line with our expectation,” Kowalski said in his 2009 Outlook.

“Our planning is based on the assumption that economic conditions will remain challenging throughout the year.” The company expects a worldwide sales decline of approximately 11 percent in 2009 and sales declines in the mid-teens percentage in the Americas.