Tiffany & Co. Q1 Profit Declines; Worldwide Net Sales Down 7%

(RTTNews) - Tiffany & Co. (TIF) reported first-quarter net earnings of $87 million, or $0.69 per share compared to $105 million, or $0.81 per share, in the prior year. The company noted that its first-quarter results included a tax benefit of $0.05 per share related to the settlement of a tax examination. On average, 23 analysts polled by Thomson Reuters expected the company to report profit per share of $0.68 for the quarter. Analysts' estimates typically exclude special items.

Tiffany said its net earnings were lower than the prior year resulting from a decline in the operating margin, as improved gross margin was more than offset by a lack of sales leverage on operating expenses.

Worldwide net sales declined 7% to $891 million and comparable store sales declined 9%. On a constant-exchange-rate basis, worldwide net sales declined 7%, and comparable store sales declined 9%. Analysts expected revenue of $915.10 million for the quarter. The company said its Worldwide net sales were lower than the prior year and reflected declines in all regions except Japan, which management attributes to a continuation of softness in spending by both local customers and foreign tourists.

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.

Gross margin increased to 61.2% in the quarter, from 59.1%, a year ago. The company said the increase was due to favorable product input costs and the effect of a shift in sales mix towards higher-margin products, as well as price increases.

Frederic Cumenal, chief executive officer, said, "As expected, this was a difficult quarter in terms of both sales and earnings growth. We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong. However, we are continuing to take actions that are intended to strengthen sales growth with local customers in the U.S. and around the world."

Tiffany & Co. said its management is now forecasting full year earnings per share in 2016 to decline by a mid-single-digit percentage from 2015's adjusted earnings per share. In March, the company projected its full year earnings per share will range from unchanged to a mid-single-digit decline compared with 2015's $3.83 per share, excluding the loan impairment and staffing and occupancy charges.

Management of Tiffany & Co. expects EPS in the second quarter to decline by a similar rate as occurred in the first quarter.