Tiffany Reports Strong Sales Growth in All Regions

Tiffany &Co. said Tuesday that worldwide net sales increased 9% year-over-year to $895 million for the first quarter of 2013. On a constant-exchange-rate basis, which excludes foreign currency fluctuations, worldwide net sales increased 13% and comparable store sales rose 8%. 

Sales growth was seen in all regions for the international luxury retailer and would have been even stronger if it was not for the unusually weak Japanese yen. 

Net earnings increased 3% to $84 million, or $0.65 per diluted share. Expenses of $9 million, or $0.05 per diluted share, were recorded in the quarter for recent staff and occupancy reductions; excluding those costs, net earnings increased 10% to $89 million, or $0.70 per diluted share. 

In addition, the company maintained its fiscal 2013 forecast of net earnings in a range of $3.43-$3.53 per diluted share. The New York-based company expects that worldwide net sales will increase by a mid-single-digit percentage in U.S dollars and a high-single-digit percentage increase on a constant-exchange-rate basis. 

"First quarter sales exceeded our expectations, enabling us to improve our sales leverage on fixed expenses and achieve earnings growth, said Michael J. Kowalski, Tiffany chairman and CEO. “In addition, we celebrated Tiffany's 175th anniversary with our very successful Blue Book event and promotional activities surrounding the debut of the film The Great Gatsby, for which we designed the jewelry." 

Kowalski added, "We are maintaining our earnings forecast for the full year, mindful of continuing soft sales results in the Americas and the negative translation effect of a weaker yen…. Tiffany's global store base is growing this year with a planned net addition of 14 stores, and we will be launching our redesigned website later this year." 

Net sales by region are as follows: 

* In the Americas, total sales rose 6% to $408 million. Comparable store sales rose 3% with relatively stronger growth in the New York flagship store. Sales in New York was aided from purchases by customers who attended the Blue Book event. 

* In the Asia-Pacific region, total sales increased 15% to $223 million. On a constant-exchange-rate basis, total sales increased 14%, due to sales growth in Greater China and most other countries. Comparable store sales rose 9%. 

* Sales in Japan increased 2% to $145 million despite a negative translation effect from a weakening yen. On a constant-exchange-rate basis, total sales increased 20% and comparable store sales rose 21% due to particularly strong growth in Tiffany's engagement and higher-end jewelry categories.

* In Europe, total sales increased 6% to $93 million due to sales growth across continental Europe. On a constant-exchange-rate basis, total sales and comparable store sales rose 8% and 6% respectively.

*Other sales tripled to $27 million from $9 million in the prior year, primarily reflecting the conversion in July 2012 of five Tiffany stores in the United Arab Emirates from independently-operated to company-operated. 

In the first quarter, Tiffany opened one store, in Xi'an, China and closed one in Taichung, Taiwan. The Company currently operates approximately 275 stores (115 in the Americas, 66 in Asia-Pacific, 55 in Japan, 34 in Europe and five in the U.A.E.), compared with 251 stores (105 in the Americas, 59 in Asia-Pacific, 55 in Japan and 32 in Europe) a year ago. 

Tiffany said it plans to add a net of 14 company-operated stores (opening six in the Americas, seven in Asia-Pacific and three in Europe, and closing one each in Japan and Taiwan), as well as refurbishing a number of existing locations around the world. 

Gross margin (gross profit as a percentage of net sales) was 56.2% versus last year's 57.3%. The company said this was expected as it reflects a shift in sales mix toward higher-priced, lower gross margin products. 

Selling, general and administrative expenses (SG&A) increased 8% in the quarter due to  $9 million of expenses tied to cost reduction initiatives related to staffing reductions, as well as subleasing of office space at a loss, the company said. Excluding those costs, SG&A expenses would have increased 6% due to new store-related costs and higher marketing spending for the Blue Book event. 

Net inventories were $2.3 billion at April 30, 2013, or 4% higher than a year ago, the company said. A 12% increase in finished goods inventories to support new store openings and expanded product assortments was partly offset by a 5% decline in combined raw material and work-in-process inventories. On a constant-exchange-rate basis, net inventories were 7% higher than a year ago.

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Tiffany Holiday Sales Up 4%, Comps Flat, at ‘Low-End Of Expectations’

Tiffany & Co. said Thursday that worldwide net sales increased 4 percent to $992 million for the November-December holiday period, while same store sales were unchanged from the prior year.

“Holiday period sales growth was at the low-end of our expectations, and we now expect that net earnings for the year ending January 31 will be at the lower-end of the forecast that we issued on November 29 of $3.20 – $3.40 per diluted share,” said Michael J. Kowalski, Tiffany chairman and CEO. “Due to uncertainty about general economic conditions in all our major markets, management is planning sales growth conservatively for 2013 and at this point expects net earnings growth of 6 percent – 9 percent.”

Net sales for the holiday period by region and category include:

Sales in the Americas region increased 3 percent to $516 million in the holiday period. On a constant-exchange-rate basis, total sales increased 2 percent, and same store sales declined 2 percent in the New York flagship store and in branch stores. Performance was relatively similar across much of the region. Internet and catalog sales rose 4 percent.

Sales in the Asia-Pacific region increased 13 percent to $187 million. On a constant-exchange-rate basis, total sales increased 11 percent (due to growth in Greater China and most other markets) and same store sales rose 7 percent.

In Japan, total sales declined 5 percent to $153 million. However, on a constant-exchange-rate basis, both total sales and comparable store sales rose 1 percent.

In Europe, sales increased 2 percent to $119 million due to mixed performances by country. On a constant-exchange-rate basis, total sales also increased 2 percent and same store sales were flat.

Other sales increased 114 percent to $17 million, largely reflecting the conversion in July of five Tiffany stores in the United Arab Emirates from independently-operated distribution to company-operated retail stores.

“Looking forward, we are formulating plans for continued store expansion and new product introductions in 2013,” Kowalski said.

Tiffany currently operates about 274 stores (115 in the Americas, 65 in Asia-Pacific, 55 in Japan, 34 in Europe and five in the U.A.E.), compared with 246 stores (102 in the Americas, 57 in Asia-Pacific, 55 in Japan and 32 in Europe) a year ago.

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Tiffany in Stalled Buyout Talks With Elsa Peretti

Elsa Peretti by Francesco Scavullo,
originally published in
Francesco Scavullo on
Beauty in 1976.

Jewelry designer, Elsa Peretti, who has created pieces for Tiffany & Co. for nearly four decades, is attempting to end her relationship with the luxury retail jeweler, according to a U.S. Securities and Exchange Commission filing Wednesday.

Peretti’s jewelry—which specializes in relatively simple figures, such as open hearts, teardrops and rounded shapes that are striking in its execution—is among Tiffany’s most popular brands, accounting for 10 percent of the retailer’s net sales in 2009, 2010 and 2011. Peretti, 72, receives a royalty for Tiffany’s use of her property rights, the retailer said in the 8k filing. Since 1974, Tiffany has been the sole licensee for the intellectual property rights (Peretti Intellectual Property) necessary to make and sell Peretti-designed products under her trademarks.

The two sides cannot agree on a price for Tiffany to purchase the intellectual property rights of Peretti, according to the 8k report filed by Tiffany in advance of its first quarter earnings report Thursday. If an agreement can’t be reached, Peretti’s advisors told Tiffany that she’d “consider exercising her right to terminate the License Agreement.” Either party can terminate the agreement with written notice.

Elsa Peretti open heart pendant in 18k rose gold.

“If Tiffany ceases to have an exclusive license to use the Peretti Intellectual Property, … operating results may be adversely affected,” Tiffany said in the report.

In the filing, Tiffany said that it “made a firm offer to Ms. Peretti in an amount that is based upon the value of the Peretti Intellectual Property to Tiffany.”

If Peretti exercises her right to terminate the license agreement, Tiffany said it would retain all rights for six months, including the right to make Peretti-designed products, following the date of notice of termination. After the six-month period, Tiffany would have a year to sell any Peretti-designed products it has on hand or on order. Afterward, Tiffany would still be permitted to sell Peretti-designed products it has on hand, subject to Peretti’s right to purchase these remaining products.

Under the current license agreement, Peretti retains ownership of Peretti Intellectual Property and exercises approval rights in regards to promotion, display, manufacture and merchandising of Peretti-designed products. In addition, Tiffany is contractually required to devote a portion of its advertising budget to the promotion of the Peretti-designed products.

Tiffany said in its report that the separation provisions in the contract would soften the blow, at least short-term. For example, marketing and merchandising requirements to promote and sell Peretti designs could be moved to other existing products. And, Tiffany said it would be “relieved” of advertisement and royalty obligations.

But Tiffany still warns of the possibility of difficult days ahead if an agreement between the two sides can’t be reached.

“Tiffany has enjoyed significant success and profitability from its longstanding relationship with Ms. Peretti, and there can be no assurance as to whether or the extent to which such mitigation efforts would offset the results realized under the License Agreement.”

Huguette M. Clark Estate Auction Includes 9-Carat Pink Diamond

The 9-ct. Belle Epoque cushion-cut, fancy vivid purplish pink diamond ring has an auction estimate of $6 - $8 million. Photo credit: Christie's Images Ltd. 2012

As reported previously, the April 17 Magnificent Jewels auction at Christie’s New York includes 12 items of art deco jewelry and objects from the estate of Huguette M. Clark.

The auction house released images of the items being offered from the estate. The top lot for the auction is a 9-carat pink diamond ring that is estimated to fetch $6 - $8 million (top picture). 

The 19.86-ct. D-color, potentially internally flawless clarity, Type IIa diamond ring by Cartier has an auction estimate of $2 - $3 million. Photo credit: Christie's Images Ltd. 2012

Another notable item is a 19.86-carat rectangular-cut diamond ring by Cartier (pictured above). 

Circa 1925 Art Deco diamond bracelet by Cartier has an auction estimate of $300,000 - $500,000. Photo credit: Christie's Images Ltd. 2012

At least six other items in the auction are from Cartier, including bracelets, a flag brooch and a desk clock. Tiffany & Co. also figures prominently in the sale with at least two items. The auction estimate for the entire collection is $9 to $12 million.

Circa 1925 Art Deco emerald and diamond bracelet by Cartier has an auction estimate of $50,000 - $70,000. Photo credit: Christie's Images Ltd. 2012

The jewelry is part of the sale of Ms. Clark’s residences at 907 Fifth Avenue in Manhattan owned by the late copper heiress. Christie’s International Real Estate has been entrusted with the sale. 

Diamond, ruby and sapphire American Flag brooch by Cartier has an auction estimate of $30,000 - $50,000. Photo credit: Christie's Images Ltd. 2012

Ms. Clark was the youngest daughter of former United States Senator and industrialist William A. Clark. She died May, 2011, at the age of 104.

Circa 1915 ruby, sapphire, emerald and gold bracelet by Tiffany & Co.has an auction estimate of $30,000 - $50,000. Photo credit: Christie's Images Ltd. 2012

Tiffany's Paris Flagship Property For Sale

The property that houses Tiffany & Co.’s flagship Paris boutique has been placed on the market for more than 30 million euros ($40 million). However, the luxury retail jeweler will not be leaving the space.

Commercial real estate services firm, CBRE, said in a statement that it has been instructed to sell what it calls “a trophy retail asset” located at the entrance to Place Vendome at 6 rue de la Paix. The 8,230-square-foot space is being sold in behalf of a private owner. It contains two retail jewelers, the second store being Kornmesser, a private Austrian luxury jewelry and porcelain retailer.

Both tenants recently committed to new long term leases, CBRE said.

Rue de la Paix is one of the most prestigious addresses in the French capital. Known as the centre of luxury retail in the city, jewelry brands in the area include Bulgari, Van Cleef, Hermes and Cartier. Luxury brands moving into the area include Louis Vuitton, which plans to open its flagship Parisian store on Place Vendôme, and luxury Swiss watch brand, Breguet, which will be opening its world’s largest store.

"Prime retail properties of this quality and with this strength of tenant are rare,” said Larry Young, International Investment, CBRE Capital Markets Paris.

Initial offers are being sought in late March, he said.