Tiffany & Co. (TIF) Reports Q1 EPS of $0.74; Updates FY16 Outlook
Tiffany & Co. (NYSE: TIF) reported Q1 EPS of $0.74, versus $0.81 reported last year. Revenue for the quarter came in at $891 million, versus $962.4 million reported last year.
Comparable store sales declined 9%. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see “Non-GAAP Measures”), worldwide net sales declined 7%, and comparable store sales declined 9%.
Net sales highlights by region in the first quarter were as follows:
- In the Americas, total sales of $403 million were 9% below the prior year and comparable store sales declined 10%. On a constant-exchange-rate basis total sales and comparable store sales declined 8% and 9%, respectively, with management attributing the declines to varying degrees of softness in spending by U.S. customers and foreign tourists.
- In the Asia-Pacific region, total sales of $238 million were 8% below the prior year and comparable store sales declined 15%. On a constant-exchange-rate basis total sales and comparable store sales declined 5% and 12%, respectively; on that basis, total sales growth in China and Korea was offset by a continued significant decline in Hong Kong and more moderate declines in other markets.
- In Japan, total sales of $131 million were 8% above the prior year and comparable store sales increased 12%. On a constant-exchange-rate basis total sales and comparable store sales rose 1% and 5%, respectively. Management attributed the sales growth to higher spending by local customers.
- In Europe, total sales of $97 million were 9% lower than the prior year and comparable store sales declined 15%. On a constant-exchange-rate basis total sales and comparable store sales declined 7% and 14%, respectively, due to softness in most countries, led by France, that management attributed largely to lower foreign tourist spending.
- Other sales declined 30% to $22 million, and comparable store sales declined 21%, reflecting lower retail sales in the United Arab Emirates (“UAE”) and wholesale sales in other markets.
- Tiffany opened two Company-operated stores in the first quarter (in Europe) and closed one location (in Japan). At April 30, 2016, the Company operated 308 stores (124 in the Americas, 81 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE), compared with 298 stores a year ago (123 in the Americas, 75 in Asia-Pacific, 56 in Japan, 39 in Europe, and five in the UAE).
Outlook:
Management is now forecasting full year earnings per diluted share in 2016 to decline by a mid-single-digit percentage from 2015’s adjusted earnings per diluted share (which excluded loan impairment and certain staffing and occupancy charges - see “Non-GAAP Measures”). Management also expects diluted EPS in the second quarter to decline by a similar rate as occurred in the first quarter. The forecast is based on the following full year assumptions, which are approximate and may or may not prove valid: (i) worldwide net sales declining by a low-single-digit percentage from the prior year; (ii) worldwide gross retail square footage increasing 2%, net through 11 openings, 6 relocations and 10 closings; (iii) operating margin below the prior year’s 19.7% (excluding the prior year’s charges – see “Non-GAAP Measures”) due to an expected increase in gross margin more than offset by SG&A expense growth; (iv) interest and other expenses, net unchanged from 2015; (v) an effective income tax rate slightly lower than the prior year; (vi) a modest year-over-year strengthening of the U.S. dollar; (vii) net inventories unchanged from the prior year; (viii) capital expenditures of $260 million; and (ix) free cash flow (net cash provided by operating activities less capital expenditures) of at least $400 million.
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