Financial Reporting
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Tiffany's 3Q sales drop
November 26, 2008
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| Comparable store sales in Tiffany's flagship store on Fifth Avenue were down 5 percent in the third quarter. |
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New York--Weak U.S. sales led to a 1 percent drop in overall sales and a 7 percent drop in same-store sales for Tiffany and Co. for the third quarter, and the retailer says it is planning to cut expenses and staffing to reflect reduced consumer demand.
While the luxury retailer's earnings beat Wall Street expectations, net sales fell to $618.2 million in the third quarter. On a constant-exchange-rate basis, worldwide net sales declined 2 percent and comparable store sales decreased 7 percent.
"Customers have adjusted their spending in reaction to economic conditions and near-term uncertainties," Tiffany Chairman and Chief Executive Officer Michael Kowalski said in a release issued on Wednesday. "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."
Still, net earnings for the three-month period ended Oct. 31, fell in comparison with the third quarter of 2007, when a substantial gain was recorded on a sale and leaseback transaction at its Tokyo flagship store, the company said.
In his remarks on the holiday season and 2009, Kowalski cited uncertain economic times but emphasized the staying power of the brand.
"It is impossible to know when consumer confidence will be restored," he said. "However, even in trying times like these, we believe customers will continue to seek classic, timeless designs that do not go out of style and can be worn and enjoyed for years to come."
So far in November, 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, the release said.
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," the release said.
"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.
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 increased 4 percent and comparable-store sales fell 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 comparable U.S. store sales of 14 percent in the third quarter and 6 percent in the year-to-date. Comparable-store sales declined 16 percent in the third quarter and 9 percent year-to-date 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 in the third quarter and 3 percent in the year to date.
Sales in Asia-Pacific 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 comparable-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 percent and 28 percent, in the respective financial periods, due to comparable-store sales growth and results from new stores.
Tiffany operated 204 Tiffany and Co. stores and boutiques as of Oct. 31, 2008 (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.
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Financial Reporting
Slashing prices wasn't enough to entice consumers to spend this holiday season, as U.S. chain store sales fell 1.7 percent in December, according to the latest study from the International Council of Shopping Centers. Read More
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