EX-99.1 3 y89359exv99w1.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'S SECOND QUARTER EARNINGS RISE 26%; COMPARABLE U.S. STORE SALES INCREASE 9% NEW YORK, August 13, 2003 - Tiffany & Co. (NYSE-TIF) today reported increases of 18% in net sales and 26% in net earnings in its second quarter ended July 31, 2003. Net earnings were 28 cents per share on a diluted basis, versus 22 cents a year ago. Michael J. Kowalski, chairman and chief executive officer, said, "We are pleased and especially encouraged by our U.S. sales growth, which strengthened as the quarter progressed, as well as with the progress we are making in many international markets. We believe these results again confirm the lasting appeal of Tiffany's products." In the second quarter, net sales of $442,495,000 were 18% higher than $374,427,000 in the prior year. Sales growth occurred in Tiffany's domestic and international operations. Worldwide, on a constant-exchange-rate basis that excludes the effect of translating local-currency-denominated sales into U.S. dollars, net sales rose 16% and comparable store sales rose 8%. Second quarter net earnings increased 26% to $41,147,000, or 28 cents per diluted share, compared with $32,714,000, or 22 cents per diluted share, a year ago. Earnings benefited from the sales increase, an improved expense ratio and a lower effective tax rate. In the six months (first half) ended July 31, 2003, net sales rose 16% to $838,334,000, compared with $721,556,000. On a constant-exchange-rate basis, net sales increased 13% and comparable worldwide store sales rose 4%. Net earnings increased 18% to $77,010,000, or 52 cents per diluted share, compared with $65,423,000, or 44 cents per diluted share. Sales results in Tiffany's four channels of distribution were as follows: 1 - U.S. Retail sales increased 14% to $213,036,000 in the second quarter and 10% to $386,622,000 in the first half. Comparable store sales increased 9% in the second quarter (up 11% in branch stores and 2% in Tiffany's New York flagship store) and 6% in the first half (up 7% in branch stores and down 1% in the flagship store). Comparable store sales growth in the quarter was generated by both an increased number of transactions and an increased average transaction amount. In the first half, the Company opened new stores in Coral Gables, Florida and Walnut Creek, California, and converted a wholesale-trade location in Guam to a company-operated TIFFANY & CO. store. - International Retail sales rose 14% to $168,987,000 in the second quarter and 13% to $334,511,000 in the first half. On a constant-exchange-rate basis, total International Retail sales increased 9% in the second quarter and 6% in the first half; on that basis, comparable retail store sales increased 4% and fractionally in Japan (total sales in Japan increased 7% and 4%), rose 4% and 2% in other Asia-Pacific markets and increased 14% and 11% in Europe. During the first half, the Company opened two department store retail locations and relocated an older one in Japan, and opened a retail location in Korea. - Direct Marketing sales increased 13% to $43,943,000 in the second quarter and 12% to $81,226,000 in the first half. Combined Internet/catalog sales rose 21% in both the quarter and the half due to continued strength in e-commerce sales, while Business sales rose 2% in the quarter and declined fractionally in the first half. - Specialty Retail sales were $16,529,000 in the second quarter and $35,975,000 in the first half, which primarily reflects the consolidated net sales of Little Switzerland, Inc. Gross margin (gross profit as a percentage of net sales) was 57.6% in the second quarter and 57.8% in the first half, which, as expected, was lower than a year ago. This was largely due to the consolidation of Little Switzerland, Inc., which the Company acquired in October 2002, as well as to changes in sales mix and a higher LIFO charge that was primarily due to higher costs of precious metals, with a partial offset from the benefit of leverage on indirect costs. The expense ratios (selling, general and administrative expenses (SG&A) as a percentage of net sales) of 42.2% in the quarter and 42.6% in the half were lower than the prior year. The Company continues to benefit from its strong financial position. Net-debt leverage was 22% at July 31, 2003 compared with 14% a year ago. The increase was primarily due to the purchase in the second quarter by the Company's Japanese subsidiary of the land and building 2 housing its flagship store in Tokyo's famous Ginza shopping district. The purchase price was 16.5 billion yen (approximately $140 million) plus transaction fees. The purchase ensures Tiffany's long-term occupancy of that prime location and the net cost will be roughly neutral to earnings. Net inventories of $814,406,000 at July 31, 2003 were 18% higher than a year ago, partly due to the inclusion of Little Switzerland's inventories, expanded manufacturing operations, the opening of new stores and the introduction of new products. The Company did not repurchase any shares of its Common Stock in the second quarter and approximately $16 million remains available for repurchases under a Board-authorized plan which expires in November 2003. Mr. Kowalski added, "There are some signs of economic improvement in the U.S. and around the world. Tiffany's recent results, combined with ongoing initiatives to open new stores, introduce new products and communicate even more effectively, allow us to remain comfortable with our previously-disclosed earnings expectations for fiscal 2003. Our specific expectations for the full year include: - a low-teens percentage increase in annual net sales (assumes comparable store sales increasing by mid-single-digits in the U.S. and low-single-digits in Japan, and 5% growth in retail store square footage, including new stores to be opened in Palm Desert, California, Hong Kong, Sao Paulo, Brazil and Puebla, Mexico); - a 1% decline in gross margin as incremental infrastructure costs (including for a new distribution center), the consolidation of Little Switzerland and a higher LIFO charge more than offset margin benefits from increased use of internal manufacturing; - a low-teens percentage increase in SG&A for store openings, business development, advertising, depreciation and insurance; - a mid-single-digit increase in operating earnings; - "other expenses, net" of approximately $15 million; - a high-single-digit increase in earnings before income taxes; - an effective tax rate of approximately 37%; and - a mid-to-high single-digit increase in net earnings, in the range of $1.33 - $1.38 per diluted share. These full year expectations continue to anticipate a net earnings decline in the third quarter and an increase in the fourth quarter. As publicly noted previously, net earnings in the third quarter of 2003 will be adversely impacted by the increased costs related to the startup and ongoing operation of the Company's new distribution center, and the year-over-year comparison will be affected by a non-recurring tax benefit in the third quarter of 2002. Based 3 on our results to date and the success of our strategic initiatives, Tiffany is very well-positioned to pursue its long-term growth opportunities and create additional and lasting shareholder value." 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 third quarter results on November 13, 2003 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. # # # 4 TIFFANY & CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited, in thousands, except per share amounts)
Three months Six months ended July 31, ended July 31, ----------------------- ----------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net sales $442,495 $374,427 $838,334 $721,556 Cost of sales 187,523 154,620 353,718 295,334 -------- -------- -------- -------- Gross profit 254,972 219,807 484,616 426,222 Selling, general and administrative expenses 186,519 160,729 357,194 308,578 -------- -------- -------- -------- Earnings from operations 68,453 59,078 127,422 117,644 Other expenses, net 3,450 4,554 5,763 8,606 -------- -------- -------- -------- Earnings before income taxes 65,003 54,524 121,659 109,038 Provision for income taxes 23,856 21,810 44,649 43,615 -------- -------- -------- -------- Net earnings $ 41,147 $ 32,714 $ 77,010 $ 65,423 ======== ======== ======== ======== Net earnings per share: Basic $ 0.28 $ 0.22 $ 0.53 $ 0.45 ======== ======== ======== ======== Diluted $ 0.28 $ 0.22 $ 0.52 $ 0.44 ======== ======== ======== ======== Weighted average number of common shares: Basic 145,294 145,780 145,094 145,607 Diluted 148,163 149,727 147,744 149,824
5 TIFFANY & CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)
JULY 31, January 31, July 31, 2003 2003 2002 ---- ---- ---- ASSETS Current assets: Cash and cash equivalents $ 116,119 $ 156,197 $ 191,326 Accounts receivable, net 104,949 113,061 87,565 Inventories, net 814,406 732,088 689,732 Deferred income taxes 44,185 44,380 48,957 Prepaid expenses and other current assets 35,705 24,662 33,708 ---------- ---------- ---------- Total current assets 1,115,364 1,070,388 1,051,288 Property, plant and equipment, net 844,631 677,630 573,475 Deferred income taxes 7,895 6,595 5,415 Other assets, net 159,144 168,973 148,358 ---------- ---------- ---------- $2,127,034 $1,923,586 $1,778,536 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 186,157 $ 52,552 $ 38,313 Current portion of long-term debt -- -- 51,500 Accounts payable and accrued liabilities 172,383 163,338 133,594 Income taxes payable 22,011 41,297 9,413 Merchandise and other customer credits 43,457 42,720 39,196 ---------- ---------- ---------- Total current liabilities 424,008 299,907 272,016 Long-term debt 289,686 297,107 289,210 Postretirement/employment benefit obligations 35,574 33,117 32,666 Other long-term liabilities 96,360 85,406 75,457 Stockholders' equity 1,281,406 1,208,049 1,109,187 ---------- ---------- ---------- $2,127,034 $1,923,586 $1,778,536 ========== ========== ==========
Certain reclassifications were made to the prior period's condensed consolidated balance sheet. 6