Tiffany & Company (TIF) posted lower-than-expected first-quarter 2012 results. The quarterly earnings of 64 cents a share missed the Zacks Consensus Estimate of 69 cents, and dropped from 67 cents earned in the prior-year quarter. The disappointing bottom-line result was a reflection of dismal performance in the Americas region due to soft demand for jewelry.
Despite registering a growth in the top line, the company witnessed a drop in the bottom line due to a 10% rise in the cost of sales and an 11% increase in selling, general and administrative expenses. Given the weaker-than-expected results and sluggish economic recovery in most of the countries, management trimmed its fiscal 2012 outlook.
On a reported basis, including one-time items, earnings inched up 1% to 64 cents a share from 63 cents delivered in the year-ago period. The prior-year quarter earnings included headquarters relocation costs of 4 cents.
Let’s Unveil the Picture
Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), posted net sales of $819.2 million during the quarter, up 8% from the prior-year quarter, on the heels of healthy performance of stores in the Asia-Pacific and Japan regions, comparable-store sales growth and new collection launches.
Total revenue came ahead of the Zacks Consensus Estimate of $818 million. Comparable-store sales climbed 4% in the quarter under review. In constant currencies, net sales jumped 8% and comps grew 4%.
By geographic segment, sales in the Americas grew 3% to $386 million, whereas comps fell 1% during the quarter; sales in the Asia-Pacific region surged 17% to $195 million and comps increased 11%; sales in Japan jumped 15% to $142 million and comps also grew by 15%; and sales in Europe climbed 3% to $88 million but comps dropped by 4%.
Other sales tumbled 14% to $9 million, reflecting a fall in the wholesale sales of end goods to independent distributors.
Gross profit for the quarter jumped 6% to $469 million; however, gross margin contracted 100 basis points to 57.3%.
Stores Update
Tiffany opened 4 outlets during the quarter. The company plans to add 24 stores in fiscal 2012 with 9 in the Americas, 8 in Asia-Pacific, 2 in Europe and 5 in the United Arab Emirates (marking the commencement of operations in the region).
As of April 30, 2012, the company operated 251 stores (105 in the Americas, 59 in Asia-Pacific, 55 in Japan and 32 in Europe).
Other Financial Details
Tiffany repurchased about 700,000 shares at $66.42 each, aggregating $46 million during the quarter.