Tiffany & Co. said Monday that net sales in the fourth quarter declined 20 percent year-over-year to $841.2 million.
On a constant-exchange-rate basis which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 19 percent and same store sales fell 23 percent. Sales declines in the Americas were the most significant contributing factor.
Net sales for the year, ended Jan. 31, fell 3 percent to $2.86 billion. On a constant-exchange-rate basis, worldwide net sales and comparable store sales declined 4 percent and 9 percent, the company said.
“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, Tiffany 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.”
In the Americas, fourth quarter sales fell 29 percent to $458.9 million. U.S. same store sales declined 33 percent in the fourth quarter, which included comparable branch store sales declines of 33 percent and a decline of 34 percent for Tiffany’s flagship store in New York.
For the full year, sales declined by 10 percent to $1.59 billion. Same store sales fell 16 percent for the year, which included comparable branch store sales declines of 17 percent and a 9 percent drop in flagship store sales for the period. Tiffany opened six stores in the Americas in 2008. Combined Internet and catalog sales in the U.S. fell 20 percent and 10 percent in the respective periods.
In the Asia-Pacific region, fourth quarter sales declined 3 percent to $279.7 million due to declines in several markets, and full year sales increased 8 percent to $922 million. On a constant-exchange-rate basis, sales declined 9 percent in the quarter and rose 1 percent in the full year, while comparable store sales declined 13 percent and 4 percent. The company opened nine stores in Asia-Pacific in 2008.
In Europe, fourth quarter sales declined 2 percent to $95.3 million and increased 17 percent to $284.6 million for the year. On a constant-exchange-rate basis, sales increased 20 percent in the quarter and 25 percent for the year largely reflecting incremental sales from new stores, while same store sales were unchanged in the quarter and rose 6 percent in the full year. The company added seven stores in Europe 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, due to varying degrees of softness in all three regions,” Kowalski said. “Our planning is based on the assumption that economic conditions will remain challenging throughout the year. However, while we have taken appropriate measures to adjust our cost structure for this environment, we are continuing to pursue initiatives to sustain customer enthusiasm and increase our market share, including selected new store openings (13 in 2009), new product introductions, and targeted marketing communications.”
He added, “Not surprisingly, it is difficult to plan in this environment. However, we believe we are being appropriately cautious to expect challenging economic conditions throughout the year, and our planned spending is based on the following full year assumptions which may or may not prove valid: (i) a worldwide sales decline of approximately 11 percent; (ii) regional sales declines of: (a) a mid-teens percentage in the Americas (greater in the first half of the year), (b) a mid-single-digit percentage in the Asia-Pacific region, (c) a high-single-digit percentage in Europe, as well as (d) a 20 percent decline in other sales; (iii) a decline in the operating margin due to the anticipated sales de-leverage effect on fixed costs (this includes the fixed cost components of cost of sales and SG&A expenses), partly offset by the benefits from planned savings from the staffing reductions and other cost-related initiatives; (iv) other expenses, net of approximately $50 million; (v) an effective tax rate of approximately 37 percent; (vi) net earnings from continuing operations of $1.50 – $1.60 per diluted share; (vii) a 33 percent decline in capital expenditures to $100 million; (viii) a single-digit percentage decline in net inventories; and (ix) free cash flow (defined as cash flow from operating activities minus capital expenditures) in excess of $400 million. Combined with our recently-completed long-term debt issuances, we’re pleased to have a balance sheet that provides more than ample liquidity to pursue our growth strategies.”