Tiffany & Co. (NYSE-TIF) today reported that its sales in the first quarter ended April 30, 2003 rose 14% due to growth in U.S. and international markets. On a constant-exchange-rate basis that excludes the effect of translating local-currency-denominated sales into U.S. dollars, net sales rose 10% and comparable worldwide store sales rose 0.4%. Net earnings growth of 10% was in line with the Company's expectations.
In the three months ended April 30, 2003, net sales increased 14% to $395,839,000, compared with $347,129,000 in the prior year. Net earnings rose 10% to $35,863,000, or 24 cents per diluted share, compared with $32,709,000, or 22 cents per diluted share, a year ago.
Michael J. Kowalski, chairman and chief executive officer, said, ''We view these results as confirmation that, despite external challenges during the quarter, Tiffany's consistent focus on its proven, long-term growth strategies is sound.''
Sales in Tiffany's four channels of distribution were as follows:
– U.S. Retail sales in the first quarter rose 5% to $173,586,000, versus $165,670,000 in 2002's first quarter. Comparable store sales increased 2%, due to 3% growth in U.S. branch store sales that was partially offset by a 5% decline in Tiffany's New York flagship store. The comparable store sales increase was due to a modest increase in the average transaction amount. In the first quarter, the Company opened a new store in Coral Gables, Florida and converted a wholesale-trade location in Guam to a company-operated TIFFANY & CO. retail store.
– International Retail sales of $165,524,000 in the first quarter were 12% higher than $147,638,000 a year ago. On a constant-exchange-rate basis, sales rose 3% in the quarter; on that basis, comparable retail store sales declined 3% in Japan (total retail sales in Japan increased 2%), declined 0.4% in other Asia-Pacific markets (including a 1% increase in Hong Kong), and increased 7% in Europe. Sales declined in Canada and rose in Latin America. During the quarter, the Company opened two department-store retail locations and relocated an older one in Japan and opened a new retail location in Korea.
– Direct Marketing sales rose 10% to $37,283,000 in the first quarter, compared with $33,821,000 a year ago. Combined Internet/catalog sales increased 22% due to continued strength in e-commerce sales, while Business sales declined 3%.
– The Specialty Retail channel primarily reflects the consolidated net sales of Little Switzerland, Inc. stores, which the Company acquired in October 2002. Sales were $19,446,000 in the first quarter.
In the quarter, gross margin (gross profit as a percentage of net sales) of 58.0% was lower, as expected, than 59.5% in the prior year, largely due to the consolidation of Little Switzerland and, to a lesser extent, changes in product and channel sales mix. The expense ratio (selling, general and administrative expenses (SG&A) as a percentage of net sales) increased over the prior year, as expected, and was 43.1% versus 42.6%.
The Company's financial position remained strong at the end of the quarter. Net-debt leverage was 16% at April 30, 2003 compared with 11% a year ago. Net inventories rose 17% to $765,780,000, due to the opening of new stores, the introduction of new products, expanded manufacturing operations and the translation effect of a weaker U.S. dollar, as well as the inclusion of Little Switzerland's inventories.
The Company purchased and retired 200,000 shares of its Common Stock in the open market during the quarter at an average cost of $23.05 per share and has approximately $16 million available for future purchases under its currently authorized plan.