Tiffany & Co. Reports Modest Net Sales Increase & Improved Operating Margin For Q2; Maintains Guidance For FY'17

Written by Lorimer Wilson

Tiffany & Co. (NYSE:TIF) today reported modest net sales increases and improved operating margins contributed to growth in diluted earnings per share for the second quarter ended July 31, 2017 and management maintained its sales and earnings guidance for the full year.

About Tiffany

Tiffany, a jeweler founded in New York in 1837, manufactures products and operates TIFFANY & CO. retail stores worldwide consisting of a total of 312 stores (124 in the Americas, 85 in Asia-Pacific, 54 in Japan, 44 in Europe, and 5 in the UAE) and also engages in direct selling through Internet, catalog and business gift operations.

Financial Highlights:

Worldwide net sales: UP 3% to $960 million with comparable store sales: DOWN 2%. Management noted an increase in wholesale sales of diamonds, increased wholesale sales in the Asia-Pacific region and strong e-commerce sales growth. Overall, growth in fashion and designer jewelry sales contrasted with softness in other jewelry categories.

>In the Americas, total sales rose 1% to $439 million while comparable store sales declined 1%. Management attributed sales softness primarily to lower spending by foreign tourists.
>In the Asia-Pacific region, total sales rose 2% to $235 million while comparable store sales declined 7%.
>In Japan, total sales rose 1% to $140 million and comparable store sales rose 3%.
>In Europe, sales rose 3% to $114 million while comparable store sales declined 2%.
> Other sales increased 74% to $32 million entirely due to increased wholesale sales of diamonds while comparable store sales declined 8%.

Net earnings: UP 9% to $115 million, or $0.92 per diluted share.

Gross margin (gross profit as a percentage of net sales): UP 40 basis points to 62.3% reflecting favorable product input costs and a shift sales mix toward higher-margin jewelry, partly offset by the effect of increased wholesale sales of diamonds.

SG&A expenses: UP 4% due to increased labor and incentive compensation costs and increased marketing spending. SG&A expenses as a percentage of net sales were 43.4% in the second quarter, versus 43.2% a year ago.

Earnings from operations as a percentage of net sales: UP 10 basis points to 18.9%.