Tiffany & Co. reported Wednesday that net sales declined 1 percent to $618.2 million in the third quarter, ended Oct. 31. On a constant-exchange-rate basis, which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 2 percent and same store sales declined 7 percent, which includes a 14 percent decline for same stores sales in the U.S.
“Customers have adjusted their spending in reaction to economic conditions and near-term uncertainties. Despite that, Tiffany maintained a high level of profitability in the third quarter and, in fact, net earnings per share rose 13 percent when excluding certain items from the prior year, said Michael J. Kowalski, Tiffany chairman and chief executive officer”
In the nine-month period (year-to-date), net sales increased 7 percent to $2 billion. On a constant-exchange-rate basis, worldwide net sales rose 4 percent and same store sales declined 2 percent.
Sales in the Americas declined 7 percent to $331.8 million in the third quarter and increased 1 percent to $1.13 billion in the year-to-date. Incremental sales from new U.S. stores, as well as growth in both Canada and Latin America, were offset by declines in same U.S. store sales of 14 percent in the third quarter and 6 percent in the year-to-date. Same store sales declined 16 percent and 9 percent in branch stores, while sales in the New York flagship store declined 5 percent in the quarter and rose 5 percent in the year-to-date. Combined Internet and catalog sales in the U.S. declined 7 percent and 3 percent in the respective periods.
Sales in Asia-Pacific region increased 3 percent to $206 million in the third quarter and 14 percent to $642.3 million in the year-to-date. On a constant-exchange-rate basis, sales declined 1 percent in the quarter and increased 5 percent in the year-to-date, resulting from same store sales growth in most countries (other than Japan) and incremental sales from new stores.
Sales in Europe rose 16 percent to $58.2 million in the third quarter and 30 percent to $189.3 million in the year-to-date. On a constant-exchange-rate basis, sales increased 24% and 28% due to comparable store sales growth and results from new stores.
The company operates 204 TIFFANY & CO. stores and boutiques at (85 in the Americas, 96 in Asia-Pacific and 23 in Europe), versus 181 locations a year ago (78 in the Americas, 87 in Asia-Pacific and 16 in Europe).
Other sales declined 1 percent to $22.3 million in the third quarter and increased 6 percent to $59.5 million in the year-to-date.
Net earnings from continuing operations in the third quarter were $43.8 million. In the prior year, net earnings were $103.1 million, or $0.74 per diluted share, which included: a pre-tax gain of $105.1 million, from the company’s sale-leaseback of the building housing its Tokyo flagship store; and a $10 million contribution, to The Tiffany & Co. Foundation. Excluding those prior-year-items, net earnings per share increased 13 percent.
In the year-to-date, net earnings from continuing operations were $188.9 million, compared with $223.6 million. Excluding the items mentioned previously, net earnings from continuing operations increased 27 percent over the comparable period in 2007. In 2007, discontinued operations included an after-tax charge of $22.6 million related to the sale of the company’s Little Switzerland business, as well as losses from those operations.
“It is impossible to know when consumer confidence will be restored,” Kowalski said.
In November-to-date, U.S. sales have softened from levels at the end of the third quarter and the company is forecasting a continuation of those weak trends through the fourth quarter, as well as challenging conditions, to a lesser extent, in Asia-Pacific and Europe.
Tiffany said it expects full-year earnings expectation is based on worldwide net sales ranging from a 2 percent decline to unchanged from 2007. Management is planning to reduce staffing in light of reduced consumer demand and to trim capital expenditures in order to achieve the most effective and prudent use of resources. Management’s current 2008 earnings expectation does not include any fourth quarter, one-time charges resulting from such staff reductions.
“We are still in the early stages of formulating our financial plans for 2009 but I can say that we will look for opportunities to increase market share, while simultaneously pursuing various cost reduction avenues appropriate for this environment, including a moderation in the rate of new store openings in 2009,” Kowalski said.
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