Tiffany Reduces 2012 Outlook Amidst Slowing Sales



Tiffany & Co.’s worldwide net sales totaled $877 million in the second quarter—a 2 percent increase over the same period in 2011—but there wasn’t much else for the company to rejoice over in its latest financial disclosure.

Sales in the Americas declined 1 percent to $434 million in the second quarter and rose just 1 percent to $820 million in the first half. Comparable store sales declined 5 percent in the quarter and 3 percent in the half. Meanwhile, sales in the New York flagship store declined 9 percent in the quarter and 7 percent in the half, while comparable branch store sales declined 4 percent and 2 percent in the same periods.

“Not surprisingly, sales growth has been affected by economic weakness in a number of markets and by a very challenging prior-year comparison to a 30 percent increase in worldwide net sales,” said Michael J. Kowalski, chairman and chief executive officer, in a statement. “We also anticipated the reduced operating margin in the quarter, adjusted for nonrecurring items, because of continued, but moderating, high product input costs and a lack of sales leverage on fixed costs. The resulting decline in net earnings, when compared with last year’s earnings excluding nonrecurring costs, was in line with our expectations and was on top of a 58 percent increase in last year’s second quarter.”

Tiffany also cut its profit outlook for 2012. The company now expects that net earnings will total $454 million to $473 million—or $3.55 to $3.70 per diluted share—compared to the previous forecast of $3.70 to $3.80 per diluted share. Tiffany also predicts that its worldwide net sales will increase 6 percent to 7 percent compared to the previous expectation of 7 percent to 8 percent growth. The company is forecasting an earnings decline in the third quarter followed by a resumption of growth in the fourth quarter.

“From a customer mix perspective, the sales decline in the U.S. in the quarter was entirely because of lower spending by local customers,” said Mark L. Aaron, vice president of investor relations, on the company’s investor conference call this morning. “While overall sales to foreign tourists were roughly unchanged from the prior year, higher sales to Japanese and Chinese visitors were offset by a decline in spending by European tourists in the U.S.”

Other highlights from Tiffany’s financial report:

  • In the Asia-Pacific region, total sales rose 1 percent to $174 million in the second quarter and 8 percent to $369 million in the first half. Comparable store sales declined 5 percent in the quarter (on top of a 41 percent increase last year) and rose 2 percent in the half.
  • In Japan, total sales increased 11 percent to $159 million in the second quarter and 13 percent to $300 million in the first half. Comparable store sales rose 10 percent in the quarter and increased 11 percent in the half; comparable store sales had increased 8 percent in last year’s second quarter.
  • Sales in Europe declined 1 percent to $100 million in the second quarter and increased 1 percent to $188 million in the first half. Comparable store sales increased 2 percent in the quarter on top of an 11 percent increase last year, and rose 1 percent in the half.
  • The company added nine stores in the second quarter: Shanghai and Nanjing, China; Mexico City; Nice, France; and five stores in the U.A.E.