Dec 06, 2019

Tiffany’s Third Quarter Sales Flat; Net Earnings Drop 17%

Tiffany & Co. reporting its financial results for the three months (third quarter) and nine months (year-to-date) ended October 31, 2019, said that worldwide net sales of US$1.0 billion for Q3 remained unchanged y-o-y.

On a constant-exchange-rate basis (which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars), worldwide net sales for the third quarter were 1% above the same period in the previous year.  

Net earnings for the third quarter amounting to US$78 million were 17% lower than US$95 million attained in the previous year; and net earnings per diluted share were US$0.65 versus US$0.77 in the prior year.

For the year-to-date period of nine months, worldwide net sales declined 2% to US$3.1 billion and comparable sales declined 3% from the prior year; on a constant-exchange-rate basis, net sales were unchanged from the prior year and comparable sales declined 1%.

Net earnings, for the same nine-month period, of US$340 million were 11% lower than the previous year’s US$382 million; and net earnings per diluted share stood at US$2.80 versus US$3.08 in the prior year.

“Worldwide net sales and comparable sales, excluding the Hong Kong market in both years, increased by 4% and 3%, respectively, from the prior year,” Tiffany pointed out. 

For both periods, net earnings declined, the Company said, “reflecting lower operating margins, a higher effective income tax rate for the third quarter and a slightly lower effective income tax rate in the year-to-date period, in each case, as compared to the prior year”.

Alessandro Bogliolo, Chief Executive Officer, commented: “Our underlying business remains healthy with sales attributed to local customers on a global basis growing in the third quarter, led by strong double-digit growth in the Chinese Mainland offset in part by softness in domestic sales in the Americas. We are continuing to amplify the Brand with the recent colourful extension of Tiffany T, the launch of the men’s collection, the unveiling of the Tiffany & Love fragrance pillars and our ‘Very, Very Tiffany Holiday campaign.’”

He concluded by saying, “We are very excited about the recently announced transaction with LVMH and, pending the required approvals, look forward to becoming part of the LVMH family of exceptional luxury brands.”

Looking at Tiffany’s sales by region, one finds that the Americas saw a decline in total net sales of 4% in both the third quarter and the year-to-date period, to US$423 million and US$1.3 billion, respectively; comparable sales decreased 4% in the third quarter and 5% in the year-to-date.

“Sales decreased across most of the region, and management attributed that decline to lower spending by foreign tourists and, to a lesser extent, local customers,” Tiffany explained. “On a constant-exchange-rate basis, total sales and comparable sales both declined 4% in the third quarter and year-to-date.”

Asia-Pacific’s total net sales remained flat in the third quarter and decreased 1% in the year-to-date, to US$294 million and US$916 million, respectively. This included comparable sales decreases of 2% in the third quarter and 3% in the year-to-date. This was attributed to the effect of foreign currency translation.

“On a constant-exchange-rate basis, total sales increased 3% in both the third quarter and year-to-date, while comparable sales increased 1% for both periods as compared to the prior year,” Tiffany noted. “Sales performance in both periods reflected the double-digit growth in the Chinese Mainland, significant disruptions in Hong Kong beginning earlier this year and mixed performance in other markets in the region. Management also attributed these sales results to higher spending by local customers largely offset by lower spending by foreign tourists.”

Japan, bucking the overall trend, reported a total net sales growth of 19% in the third quarter and 5% in the year-to-date, to US$169 million and US$469 million, respectively; comparable sales increased 19% and 4% for those same periods, respectively. “On a constant-exchange-rate basis, total sales increased 14% in the third quarter and 4% in the year-to-date, and comparable sales increased 14% and 3%, respectively,” Tiffany underlined. “Management believes that strong sales growth in the quarter prior to October 1, 2019 reflected the Japanese consumers’ response to the increase in Japan’s consumption tax that took effect on that date.”

In Europe Tiffany’s total net sales declined 3% in the third quarter and 4% in the year-to-date, to US$111 million and US$330 million, respectively; and comparable sales were unchanged in the third quarter and declined 4% in the year-to-date. “Management attributed these changes to the effect of foreign currency translation,” Tiffany stated. “On a constant-exchange-rate basis, total sales increased 1% in both the third quarter and the year-to-date; comparable sales increased 4% and 1%, respectively.”

Other net sales decreased 13% to US$17 million in the third quarter and increased by 2% in the year-to-date to US$67 million. Comparable sales declined 3% and 17% in the third quarter and the year-to-date, respectively.

In the nine-month period to October 31, 2019, Tiffany opened five Company-operated stores and closed three. As at October 31, 2019, the Company operated 323 stores (124 in the Americas, 90 in Asia-Pacific, 56 in Japan, 48 in Europe, and five in the UAE).

Analysing sales for the various categories of jewellery, for both periods, Tiffany said summing up: Jewellery Collections was unchanged for both periods; Engagement Jewellery was unchanged and declined 3%, respectively; and Designer Jewellery increased 1% and declined 8%, respectively.

While Tiffany’s net inventories as at October 31, 2019 were 4% higher than those held in the previous year; cash and cash equivalents and short-term investments totaled US$530 million. “Total debt (short-term borrowings and long-term debt) of US$974 million represented 31% of stockholders’ equity, which is the same as a year ago,” Tiffany concluded.