28 Oct 2020
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Tiffany global holiday sales decline
Worldwide net sales declined 1% to $1.04 billion and comparable sales declined 2%
By: Diamond World News Service
Jan 21 2019 2:45PM
Reference: 16943  


Tiffany & Co reported its sales results for the two months (“holiday period”) ended December 31, 2018. Worldwide net sales declined 1% to $1.04 billion and comparable sales declined 2%. However, on a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see “Non-GAAP Measures”), both net sales and comparable sales were equal to the prior year. Management updated its outlook for the year ending January 31, 2019 (“fiscal 2018”) and provided preliminary guidance for fiscal 2019.

Alessandro Bogliolo, Chief Executive Officer, said, “With continued strong sales growth in mainland China (by a double-digit percentage), solid results in Japan and healthy growth in global ecommerce sales, overall holiday sales results came in short of our expectations which had called for modest year-over-year growth. We attribute the difference partly to lower sales to foreign (primarily Chinese) tourists globally, and to softening demand attributed to local customers in the Americasand Europe, which we believe may have been influenced more than expected by external events, uncertainties and market volatilities.”

Mr. Bogliolo added, “As I reflect on 2018, we accomplished what we set out to achieve. By increasing the levels of strategic investment spending in certain areas, we recovered lost ground from several years of soft sales trends and we expect to report record levels of net sales and net earnings in fiscal 2018 (see “Fiscal 2018 Outlook” below). Now the focus is to grow to new heights. To this purpose, we will continue to pursue the six key strategic priorities we introduced earlier in 2018 (Amplifying an evolved brand message; Renewing our product offerings and enhancing in-store presentations; Delivering an exciting omnichannel customer experience; Strengthening our competitive position and leading in key markets; Cultivating a more efficient operating model; and Inspiring an aligned and agile organization to win) which will require our on-going effort and commitment for years to come.

We are excited about making further meaningful progress on this journey in 2019, with plans for new product launches, an evolved marketing message, store expansions and website enhancements. We acknowledge that external pressures, difficult year-over-year sales comparisons and annualized internal spending are expected to have some negative effects on fiscal 2019 results, mostly in the first half of the year, but we believe that Tiffany is on a solid path for improved sales, margins, earnings and cash flow generation over the long-term (see “Fiscal 2019 Preliminary Outlook” below).”

Net sales by region in the holiday period were as follows:

  • In the Americas, total net sales declined 1% to $514 million, with slight declines attributed to spending by both local customers and foreign tourists; comparable sales were equal to the prior year. On a constant-exchange-rate basis, both total sales and comparable sales were equal to the prior year.
  • In Asia-Pacific, total net sales of $226 million were 3% below the prior year, reflecting higher sales attributed to local customers, with strong growth in mainland China, but softness in certain other markets that are more dependent on foreign tourist spending; comparable sales declined 4%. On a constant-exchange-rate basis, total sales were equal to the prior year and comparable sales declined 2%.
  • In Japan, total net sales rose 4% to $150 million and comparable sales rose 4%. Management attributed the sales growth to higher spending by local customers. On a constant-exchange-rate basis, both total sales and comparable sales increased 4%.
  • In Europe, total net sales of $132 million were 4% below the prior year, and comparable sales declined 5%, due to varied results by country and modest declines in spending attributed to both local customers and foreign tourists. On a constant-exchange-rate basis, total sales rose 1% and comparable sales declined 1%.
  • Other net sales of $14 million were 11% below the prior year due to lower comparable sales in five stores in the U.A.E.
  • Tiffany has opened ten Company-operated stores in the year-to-date and closed four. At December 31, 2018, the Company operated 321 stores (124 in the Americas, 90 in Asia-Pacific, 55 in Japan, 47 in Europe, and five in the UAE), versus 316 stores a year ago (125 in the Americas, 87 in Asia-Pacific, 54 in Japan, 46 in Europe, and four in the UAE).
  • Sales results by jewelry category in the holiday period were as follows: Jewelry Collections increased 2%, while Engagement Jewelry and Designer Jewelry sales declined 3% and 8%, respectively.

Fiscal 2018 Outlook:

Based on these holiday period sales results, management now expects that (i) worldwide net sales for fiscal 2018 will increase by 6%-7% over the prior year both as reported and on a constant-exchange-rate basis and (ii) net earnings per diluted share will likely be towards the lower end of its previously-disclosed range of $4.65-$4.80 per diluted share. These expectations are approximations and are based on the Company’s plans and assumptions for the full year, including: (i) mid-single-digit comparable sales growth; (ii) worldwide gross retail square footage increasing 2%, net through 10 store openings, four closings and at least 15 relocations; (iii) operating margin below the prior year as a result of significant SG&A expense growth (affected by higher investment spending in technology, marketing communications, visual merchandising, digital and store presentations, as well as initial expenses related to the renovation of the Company’s New York Cityflagship store) at a higher rate than sales growth, partly offset by a higher gross margin; (iv) interest and other expenses, net in line with the prior year; (v) an effective income tax rate in the low-20’s; (vi) the U.S. dollar in the fourth quarter of the year stronger on a year-over-year basis; and (vii) EPS benefitting from share repurchases which are expected to exceed $400 million for the full year.

Management also expects: (i) net cash provided by operating activities of approximately $550 million and (ii) free cash flow (see “Non-GAAP Measures”) of approximately $250 million. These expectations are approximations and are based on the Company’s plans and assumptions for the full year, including: (i) net inventory growth approximately in line with sales growth, (ii) capital expenditures of approximately $280 million and (iii) net earnings in line with management’s expectations, as described above.

Fiscal 2019 Preliminary Outlook:

Given external challenges and uncertainties, management’s preliminary view for fiscal 2019 includes: (i) worldwide net sales increasing by a low-single-digit percentage over the prior year as reported and on a constant-exchange-rate basis; (ii) net earnings per diluted share increasing by a mid-single-digit percentage (which assumes a higher effective tax rate); and (iii) an expected decline in net earnings in the first half of the year, reflecting sales pressures (from lower foreign tourist spending and the effect of a stronger U.S. dollar) as well as expenses related to the annualized effect of higher strategic investment spending that began in the second quarter of 2018, among other factors. Management will provide additional information regarding its fiscal 2019 outlook when it reports full year results in March.

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