Written by Lorimer Wilson

Tiffany & Co. (NYSE:TIF) today reported modest net sales increases and improved operating margins contributed to growth in diluted earnings per share for the second quarter ended July 31, 2017 and management maintained its sales and earnings guidance for the full year.

About Tiffany

Tiffany, a jeweler founded in New York in 1837, manufactures products and operates TIFFANY & CO. retail stores worldwide consisting of a total of 312 stores (124 in the Americas, 85 in Asia-Pacific, 54 in Japan, 44 in Europe, and 5 in the UAE) and also engages in direct selling through Internet, catalog and business gift operations.

Financial Highlights:

• Worldwide net sales: UP 3% to $960 million with comparable store sales: DOWN 2%. Management noted an increase in wholesale sales of diamonds, increased wholesale sales in the Asia-Pacific region and strong e-commerce sales growth. Overall, growth in fashion and designer jewelry sales contrasted with softness in other jewelry categories.
  • >In the Americas, total sales rose 1% to $439 million while comparable store sales declined 1%. Management attributed sales softness primarily to lower spending by foreign tourists.
  • >In the Asia-Pacific region, total sales rose 2% to $235 million while comparable store sales declined 7%.
  • >In Japan, total sales rose 1% to $140 million and comparable store sales rose 3%.
  • >In Europe, sales rose 3% to $114 million while comparable store sales declined 2%.
  • > Other sales increased 74% to $32 million entirely due to increased wholesale sales of diamonds while comparable store sales declined 8%.
• Net earnings: UP 9% to $115 million, or $0.92 per diluted share.
• Gross margin (gross profit as a percentage of net sales): UP 40 basis points to 62.3% reflecting favorable product input costs and a shift sales mix toward higher-margin jewelry, partly offset by the effect of increased wholesale sales of diamonds.
• SG&A expenses: UP 4% due to increased labor and incentive compensation costs and increased marketing spending. SG&A expenses as a percentage of net sales were 43.4% in the second quarter, versus 43.2% a year ago.
• Earnings from operations as a percentage of net sales: UP 10 basis points to 18.9%.

Fiscal 2017 Outlook:

Management’s outlook for fiscal 2017 calls for:

• worldwide net sales increasing over the prior year by a low-single-digit percentage as reported and on a constant-exchange-rate basis,
• net earnings per diluted share increasing by a high-single-digit percentage over 2016’s earnings per diluted share of $3.55 and by a mid-single-digit-percentage over 2016’s earnings per diluted share (excluding charges) of $3.75
• earnings per diluted share in the second half of fiscal 2017 increasing over the prior year’s second half, with the growth occurring in the fourth quarter. 
• net cash provided by operating activities of approximately $700 million and
• free cash flow of approximately $450 million.

Michael J. Kowalski, Chairman of the Board and Interim Chief Executive Officer, said in today's press release:

“While net earnings rose in the first half, we remain determined to drive comparable store sales growth and stronger, sustainable
earnings growth through a continued focus on product design innovation in jewelry and luxury accessories, further optimization of our store base, more impactful marketing communications and highly effective customer engagement both in-store and online.

We were delighted to recently announce the appointment of a new Chief Executive Officer, Alessandro Bogliolo, an accomplished jewelry and luxury retail executive who will soon join Tiffany. My fellow directors and I believe that, under his leadership, the management team can realize the potential of our extraordinary global brand.”