EX-99.1 3 ex99-1.txt PRESS RELEASE Exhibit 99.1 TIFFANY & CO. NEWS RELEASE Fifth Avenue & 57th Street Contacts: New York, N.Y. 10022 --------- James N. Fernandez (212) 230-5315 Mark L. Aaron (212) 230-5301 TIFFANY REPORTS THIRD QUARTER RESULTS; -------------------------------------- COMPARABLE U.S. STORE SALES INCREASE 16%; ----------------------------------------- COMPANY UPDATES ITS BUSINESS OUTLOOK ------------------------------------ NEW YORK, November 13, 2003 - Tiffany & Co. (NYSE-TIF) today reported 18% growth in its worldwide net sales in the third quarter ended October 31, 2003. Net earnings were 20% lower than the prior year, due to a prior-year tax benefit. In the third quarter, net sales rose 18% to $430,123,000, versus $366,033,000 in the prior year, due to geographically broad-based sales growth in most of Tiffany's domestic and international markets. Worldwide, on a constant-exchange-rate basis that excludes the effect of translating local-currency-denominated sales into U.S. dollars, net sales increased 15% and comparable store sales rose 10%. Net earnings in the third quarter declined 20% to $28,031,000, or 19 cents per diluted share, compared with $35,184,000, or 24 cents per diluted share, in 2002. The decline in net earnings resulted from a non-recurring tax benefit of $8,015,000, or 5 cents per diluted share, in the third quarter of 2002 (see "Other Financial Highlights"). For the nine-month period (year-to-date) ended October 31, 2003, net sales increased 17% to $1,268,457,000, versus $1,087,589,000. On a constant-exchange-rate basis, net sales rose 14% and comparable worldwide store sales rose 6%. Net earnings increased 4% to $105,041,000, or 71 cents per diluted share, compared with $100,607,000, or 68 cents per diluted share. Michael J. Kowalski, chairman and chief executive officer, said, "We are delighted with the dramatically improving sales trends we've seen in the U.S. this year, characterized by extraordinary growth in diamond jewelry sales, as 1 well as strength in a number of international markets. And we are excited with the continued exceptional results in our e-commerce business. However, our business in Japan has performed below our expectations, largely due to especially weak sales of silver jewelry, although we believe product introductions will contribute to improved trends." Sales performance in Tiffany's four channels of distribution was as follows: ---------------------------------------------------------------------------- o U.S. Retail sales in the third quarter rose 20% to $202,844,000 and year-to-date sales rose 13% to $589,466,000. On a comparable store basis, sales in the quarter rose 16% (up 16% in branch stores and 15% in Tiffany's New York flagship store) and in the year-to-date rose 9% (up 10% in branch stores and 4% in the flagship store). Comparable store sales growth in the quarter and year-to-date was generated by an increased average transaction amount and an increased number of transactions. Year-to-date, the Company has opened a new store in Coral Gables, Florida and new stores in Walnut Creek and Palm Desert, California, and converted a wholesale-trade location in Guam to a company-operated TIFFANY & CO. store. o International Retail sales increased 11% to $173,533,000 in the third quarter and 12% to $508,044,000 in the year-to-date. On a constant-exchange-rate basis, total International Retail sales increased 5% in the third quarter and 6% in the year-to-date; on that basis, comparable retail store sales in Japan declined 3% and 1% (total retail sales in Japan increased fractionally and 3%), in other Asia-Pacific markets rose 25% and 10% and in Europe rose 10% and 11%. Year-to-date, the Company has opened two department store retail locations and relocated an older one in Japan, and opened retail locations in Korea, Mexico and Brazil. In the fourth quarter, the Company expects to open an additional retail location in Japan. o Direct Marketing sales in the third quarter rose 5% to $39,311,000 and year-to-date sales rose 10% to $120,537,000. Combined Internet/catalog sales increased 23% in the quarter and 22% in the year-to-date due to continued strength in e-commerce sales. Business sales declined 19% in the quarter and 6% in the year-to-date, reflecting the Company's previously-announced decision to leave the market for employee service 2 award programs. The Company will continue to offer a range of business gifts, event-related trophies and other awards. o Specialty Retail sales were $14,435,000 in the third quarter and $50,410,000 in the year-to-date. In both the prior year's quarter and year-to-date, sales were $3,921,000, which is not fully comparative due to the consolidated net sales of Little Switzerland, Inc. which the Company acquired in October 2002. Other Financial Highlights: --------------------------- o Gross margin (gross profit as a percentage of net sales) was 55.3% in the third quarter versus 59.0% a year ago. The decline was due to: the consolidation of Little Switzerland, Inc.; the opening of an additional distribution center during the third quarter; changes in sales mix toward higher-priced, lower-margin diamond jewelry as the retail selling environment improved; and a LIFO inventory charge of $3,500,000 in the third quarter versus a LIFO inventory credit of $500,000 a year ago primarily due to higher precious metal costs. In the year-to-date, gross margin was 56.9% versus 59.0% a year ago. o The expense ratio (selling, general and administrative expenses as a percentage of net sales) of 43.8% in the quarter and 43.0% in the year-to-date was lower than the prior year due to favorable leverage on fixed costs from the sales growth. o The non-recurring tax benefit recorded in the third quarter of 2002 involved the recognition of the cumulative U.S. tax benefit provided by the Extraterritorial Income Exclusion Act. o The Company's financial position remains strong. Net-debt leverage was 23% at October 31, 2003, compared with 22% a year ago. In 2003's second quarter, the Company's Japanese subsidiary purchased the land and building housing its flagship store in Tokyo's famous Ginza shopping district. The purchase price was approximately $140 million plus transaction fees. The Company completed a long-term financing of that purchase in the third quarter. 3 o Net inventories at October 31, 2003 were 15% higher than a year ago. Approximately one-third of the increase was due to the translation effect from a weaker U.S. dollar, with the remainder due to expanded manufacturing operations, the opening of new stores and the introduction of new products. o The Company did not repurchase any shares of its Common Stock in the third quarter and $16.5 million remains available for repurchases under a Board-authorized plan which expires this month. Outlook ------- Mr. Kowalski added, "Tiffany's overall success so far this year, complemented by generally improving external conditions, lead us to believe that we can achieve earnings of $1.35 - $1.40 per diluted share for fiscal 2003, versus our previous expectation of $1.33-$1.38." Specific expectations for the fourth quarter include: o a low-double-digit percentage increase in net sales (assumes comparable store sales increasing by low-double-digits in the U.S. and low-single-digits in Japan); o a slight year-over-year decline in gross margin; o a mid-teens percentage increase in SG&A, which reflects store openings, business development, advertising, depreciation and insurance; o "other expenses, net" of approximately $4-5 million; o an effective tax rate of approximately 37%; and o net earnings of 64-69 cents per diluted share. Mr. Kowalski added, "Tiffany will continue its pursuit of healthy and sustainable organic growth through new store openings, product introductions and enhanced customer awareness of high-quality, emotionally resonant products to celebrate life's important occasions. Similarly, we will also pursue further development of our Specialty Retail channel. In fact, we plan to launch a new non-TIFFANY & CO. retail concept in 2004, which will capitalize on the underserved and competitively fragmented market for pearl jewelry. Looking to the future, the entire Tiffany organization is very well-positioned to create additional and lasting shareholder value," he concluded. 4 The Company will host a conference call today at 8:30 a.m. (EST) to review these results and its outlook. Interested parties may listen to a broadcast on the Internet at www.tiffany.com (click on "About Tiffany," "Shareholder Information," "Conference Call") and at www.streetevents.com. Tiffany & Co. is the internationally renowned jeweler and specialty retailer. Sales are made primarily through company-operated TIFFANY & CO. stores and boutiques in the Americas, Asia-Pacific and Europe. Direct Marketing includes Tiffany's Business Sales division, Internet and catalog sales. Specialty Retail primarily includes the retail sales made in Little Switzerland, Inc. stores and also includes consolidated results from other ventures now operated or to be operated under non-TIFFANY & CO. trademarks or trade names. Additional information can be found on Tiffany's Web site, www.tiffany.com, and on its shareholder information line 800-TIF-0110. The Company anticipates reporting its holiday sales results on January 8, 2004 and conducting a conference call at 8:30 a.m. (EST) that day, to be broadcast at www.tiffany.com and www.streetevents.com. To receive future notifications for conference calls and/or news release alerts, interested parties may register at www.tiffany.com (click on "About Tiffany," "Shareholder Information," "Calendar of Events" and "News by E-Mail"). This press release contains certain "forward-looking" statements concerning expectations for sales, store openings, margins and earnings. Actual results might differ materially from those projected in the forward-looking statements. Information concerning factors that could cause actual results to differ materially are set forth in Tiffany's 2002 Annual Report and in Form 10-K, 10-Q and 8-K Reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. # # # 5 TIFFANY & CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited, in thousands, except per share amounts)
Three months Nine months ended October 31, ended October 31, ----------------------------------- -------------------------------------- 2003 2002 2003 2002 ------------- ------------- --------------- --------------- Net sales $ 430,123 $ 366,033 $ 1,268,457 $ 1,087,589 Cost of sales 192,402 150,220 546,120 445,554 ------------- ------------- --------------- --------------- Gross profit 237,721 215,813 722,337 642,035 Selling, general and administrative expenses 188,506 165,900 545,700 474,478 ------------- ------------- --------------- --------------- Earnings from operations 49,215 49,913 176,637 167,557 Other expenses, net 4,933 5,446 10,696 14,052 ------------- ------------- --------------- --------------- Earnings before income taxes 44,282 44,467 165,941 153,505 Provision for income taxes 16,251 9,283 60,900 52,898 ------------- ------------- --------------- --------------- Net earnings $ 28,031 $ 35,184 $ 105,041 $ 100,607 ============= ============= =============== =============== Net earnings per share: Basic $ 0.19 $ 0.24 $ 0.72 $ 0.69 ============= ============= =============== =============== Diluted $ 0.19 $ 0.24 $ 0.71 $ 0.68 ============= ============= =============== =============== Weighted average number of common shares: Basic 146,047 145,137 145,412 145,450 Diluted 149,079 148,066 148,024 149,046
6 TIFFANY & CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)
October 31, January 31, October 31, 2003 2003 2002 ------------------ ------------------ ------------------ ASSETS Current assets: Cash and cash equivalents $ 152,724 $ 156,197 $ 90,646 Accounts receivable, net 115,411 113,061 96,112 Inventories, net 897,482 732,088 777,932 Deferred income taxes 44,503 44,380 48,660 Prepaid expenses and other current assets 43,840 24,662 39,519 -------------- -------------- -------------- Total current assets 1,253,960 1,070,388 1,052,869 Property, plant and equipment, net 877,205 677,630 650,499 Deferred income taxes 1,967 6,595 6,377 Other assets, net 158,854 168,973 159,177 -------------- -------------- -------------- $ 2,291,986 $ 1,923,586 $ 1,868,922 ============== ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 128,202 $ 52,552 $ 58,268 Current portion of long-term debt 50,573 - 51,500 Accounts payable and accrued liabilities 199,756 163,338 182,123 Income taxes payable 952 41,297 485 Merchandise and other customer credits 44,867 42,720 39,520 -------------- -------------- -------------- Total current liabilities 424,350 299,907 331,896 Long-term debt 386,677 297,107 295,947 Postretirement/employment benefit obligations 36,803 33,117 33,999 Other long-term liabilities 97,508 85,406 81,905 Stockholders' equity 1,346,648 1,208,049 1,125,175 -------------- -------------- -------------- $ 2,291,986 $ 1,923,586 $ 1,868,922 ============== ============== ============== Certain reclassifications were made to the prior period's condensed consolidated balance sheet.
7