Tiffany’s 2007 Sales Rise; Cautious about the U.S. in 2008
March 24, 08
Tiffany & Co. reported strong results for the year and December-ended quarter Monday. Net sales in the fiscal year increased 15 percent to $2.94 billion. Net earnings increased 20 percent to $303.77 million compared with $253.93 million in 2006. On a constant-exchange-rate basis, which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, net sales increased 13 percent, and worldwide comparable store sales increased 7 percent. Net sales in the fourth quarter rose 10 percent to $1.053 billion, very good results considering the tough market many jewelry retailers faced during the holiday season. On a constant-exchange-rate basis, net sales increased 7 percent due to incremental sales from newly-opened stores and a 1 percent increase in worldwide comparable store sales. However, net earnings in the fourth quarter declined 16 percent to $118.25 million, adversely affected by several one-time items. They include a pre-tax charge of $19.21 million made in cost of sales – a result of a decision to discontinue certain watch models ahead of the start-up of its Swatch cooperation. Another pre-tax charge of $15.53 million resulted from lower-than-expected store performance and a related reduction in cash flow projections at Tiffany’s subsidiary IRIDESSE. The company was also hurt by the fall of diamond miner Tahera. Tiffany does not expect the miner to payback loans, writing off nearly $48 million. Another loss was generated by it’s now sold Little Switzerland business – $59.66 million in 2007. While direct marketing sales declined 1 percent in the fourth quarter, annually these sales rose 5 percent to $182.13 million, largely due to an increase in the number of Internet orders. CEO Michael J. Kowalski said he was “pleased” with Tiffany's strategic progress and overall financial performance. In his outlook for 2008, Kowalski said he expects to see robust growth in Tiffany’s non-U.S. markets other than Japan, which are already experiencing growth in excess 10 percent in the quarter-to-date. “We remain cautious about the U.S., although comparable store sales are currently increasing slightly. We still expect a slight decline in comparable U.S. store sales in the first half of the year,” Kowalski cautioned. For the full year, net sales growth of approximately 10 percent is projected, including comparable store sales increasing by low-single-digits in the U.S. and mid-single-digits internationally. This also assumes the opening of six new U.S. stores and approximately 20 international locations.