Tiffany & Co., New York, reported 18% growth in its worldwide net sales in the third quarter ended October 31. Net earnings were 20% lower than the prior year, due to a prior-year tax benefit.
In the third quarter, net sales rose 18% to $430.1 million versus $366 in the prior year, due to geographically broad-based sales growth in most of Tiffany’s domestic and international markets. Worldwide, on a constant-exchange-rate basis that excludes the effect of translating local-currency-denominated sales into U.S. dollars, net sales increased 15% and comparable store sales rose 10%.
Net earnings in the third quarter fell 20% to $28 million compared with $35.1 million in 2002. The decline in net earnings resulted from a non-recurring tax benefit of $8 million in the third quarter of 2002.
For the nine-month period (year-to-date) ended Oct. 31, net sales increased 17% to $1.2 million versus $1.087 million. On a constant-exchange-rate basis, net sales rose 14% and comparable worldwide store sales rose 6%. Net earnings increased 4% to $105 million compared with $100 million.
“We are delighted with the dramatically improving sales trends we’ve seen in the U.S. this year, characterized by extraordinary growth in diamond jewelry sales, as well as strength in a number of international markets,” said Michael J. Kowalski, chairman and chief executive officer. “And we are excited with the continued exceptional results in our e-commerce business. However, our business in Japan has performed below our expectations, largely due to especially weak sales of silver jewelry, although we believe product introductions will contribute to improved trends.”
Sales performance in Tiffany’s four channels of distribution was as follows:
· U.S. Retail sales in the third quarter rose 20% to $202million and year-to-date sales rose 13% to $589 million. On a comparable store basis, sales in the quarter rose 16% (up 16% in branch stores and 15% in Tiffany’s New York flagship store) and in the year-to-date rose 9% (up 10% in branch stores and 4% in the flagship store). Comparable store sales growth in the quarter and year-to-date was generated by an increased average transaction amount and an increased number of transactions. Year-to-date, the Company opened a new store in Coral Gables, Florida and new stores in Walnut Creek and Palm Desert, California, and converted a wholesale-trade location in Guam to a company-operated TIFFANY & CO. store.
· International Retail sales increased 11% to $173 million in the third quarter and 12% to $508 million in the year-to-date. On a constant-exchange-rate basis, total International Retail sales increased 5% in the third quarter and 6% in the year-to-date; on that basis, comparable retail store sales in Japan declined 3% and 1% (total retail sales in Japan increased fractionally and 3%), in other Asia-Pacific markets rose 25% and 10% and in Europe rose 10% and 11%. Year-to-date, the Company has opened two department store retail locations and relocated an older one in Japan, and opened retail locations in Korea, Mexico, and Brazil. In the fourth quarter, the Company expects to open an additional retail location in Japan.
· Direct Marketing sales in the third quarter rose 5% to $39 million and year-to-date sales rose 10% to $120.5 million. Combined Internet/catalog sales increased 23% in the quarter and 22% in the year-to-date due to continued strength in e-commerce sales. Business sales declined 19% in the quarter and 6% in the year-to-date, reflecting the company’s previously-announced decision to leave the market for employee service award programs. The Company will continue to offer a range of business gifts, event-related trophies and other awards.
· Specialty Retail sales were $14.4 million in the third quarter and $50 million in the year-to-date. In both the prior year’s quarter and year-to-date, sales were $3.9 million, which is not fully comparative due to the consolidated net sales of Little Switzerland, Inc. which Tiffany acquired in October 2002.
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