Tiffany & Co., New York, said net sales in its first quarter ended April 30 increased 15% to $457 million, driven by strong growth in the U.S., as well as in most international markets. On a constant-exchange-rate basis that excludes the effect of translating local-currency-denominated sales into U.S. dollars, worldwide net sales rose 11% and comparable store sales rose 9%.
Net earnings in the quarter increased 12% to $40.3 million, compared with $35.9 million in the prior year.
“Total sales and earnings growth in the first quarter exceeded our expectations thanks to exceptionally strong U.S. results,” Michael J. Kowalski, Tiffany chairman and CEO, said in a statement. “We are very encouraged with the way we have begun 2004.”
Sales performance in Tiffany’s channels of distribution was as follows:
* U.S. retail sales increased 23% in the first quarter to $213.7 million. Comparable store sales rose 20% due to a 30% increase in Tiffany’s New York flagship store and 17% growth in branch store sales. The average amount spent per transaction increased. In addition, comparable store growth was broadly generated by increased sales to local-resident customers as well as to domestic and foreign tourists. The company operates 51 TIFFANY & CO. stores in the U.S.
* International retail sales rose 12% to $185 million in the first quarter. On a constant-exchange-rate basis, international retail sales rose 2% and comparable store sales declined 2%. On that basis, comparable store sales fell 10% (total sales dropped 9%) in Japan, rose 26% in other Asia-Pacific markets and rose 7% in Europe.
* Direct marketing sales fell 1% in the first quarter to $36.9 million. A combined 15% increase in e-commerce and catalog sales resulted from an increase in the average order size and higher e-commerce orders. However, business sales fell 24%, as expected, due to the year-over-year effect of the company’s strategic decision to discontinue service award program sales during 2003.
* Specialty retail sales increased 11% to $21.7 million in the first quarter primarily due to sales growth in LITTLE SWITZERLAND stores.
Other Financial Highlights:
* Gross margin (gross profit as a percentage of net sales) was 56.8% in the first quarter versus 58% in the prior year. As expected, the decline primarily reflected a LIFO inventory charge of $3.6 million (versus $600,000 a year ago) to reflect higher precious metal costs, as well as incremental costs related to the opening of an additional distribution center in the third quarter of 2003.
* Selling, general and administrative expenses (“SG&A”) increased 12% in the first quarter. The ratio of SG&A as a percentage of net sales improved to 41.9% versus 43.1% a year ago.
* The company’s financial position is strong.
* Net-debt leverage was 18% at April 30 versus 16% a year ago.
* Net inventories as of April 30 were 26% higher than a year ago primarily reflecting higher raw material and work-in-process levels to support expanded internal manufacturing and rough-diamond sourcing and, to a lesser extent, higher finished goods levels for new stores and new products and the translation effect of a weaker U.S. dollar against most currencies.
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