Tiffany Reports Second Quarter Results; Comparable Store Sales up 5% in U.S. and 10% Internationally

In the second quarter, net sales increased 9% to $574,940,000,compared with $526,701,000 in the prior year. On aconstant-exchange-rate basis which excludes the effects of translatingforeign-currency-denominated sales into U.S. dollars (see attached"Non-GAAP Measures" schedule), net sales increased 10% and worldwidecomparable store sales rose 6%.

Net earnings in the second quarter were $41,144,000, or $0.29 perdiluted share, compared with $50,551,000, or $0.35 per diluted share.Earnings in the prior year included a tax benefit of $6,600,000, or$0.05 per diluted share, related to the repatriation provisions of theAmerican Jobs Creation Act of 2004 ("AJCA"). Earnings before incometaxes declined 4%.

In the six-month period (first half) ended July 31, 2006, netsales of $1,114,181,000 were 7% higher than $1,036,602,000 a year ago.On a constant-exchange-rate basis, net sales increased 9% andworldwide comparable store sales rose 5%.

First half net earnings of $84,286,000, or $0.59 per dilutedshare, compared with $90,609,000, or $0.62 per diluted share, in theprior year. Earnings in the prior year included AJCA tax benefits of$8,100,000, or $0.06 per diluted share. Earnings before income taxesincreased 4%.

Sales by channel of distribution were as follows:

-- U.S. Retail sales increased 8% to $288,556,000 in the second quarter and 5% to $549,136,000 in the first half. Comparable store sales increased 5% in the quarter but declined in July (quarterly sales rose 5% in the New York flagship store and 4% in branch stores) and rose 2% in the first half (New York flagship store sales declined 1% and branch store sales rose 2%). Comparable store sales growth in the quarter resulted from higher spending per transaction. The Company operated 60 TIFFANY & CO. stores in the U.S. at the end of the quarter.

-- International Retail sales increased 10% to $223,153,000 in the second quarter and 12% to $438,317,000 in the first half. On a constant-exchange-rate basis, sales rose 12% in the quarter and 16% in the first half due to 6% and 11% total retail sales growth in Japan and solid growth in most other countries; on that same basis, comparable international store sales increased 10% in the quarter and 13% in the first half, due to growth of: 2% in the quarter (but a decline in July) and 7% in the half in Japan; 27% and 24% in the Asia-Pacific region outside Japan; and 17% and 20% in Europe. The Company operated 97 TIFFANY & CO. international stores and boutiques at the end of the quarter.

-- Direct Marketing sales increased 18% to $35,742,000 in the second quarter and 11% to $65,699,000 in the first half. The increases in both periods were due to growth in the number of orders and in the average amount spent per order.

-- Other sales in the second quarter increased 4% to $27,489,000 and sales of $61,029,000 in the first half were equal to the prior year. LITTLE SWITZERLAND sales rose 10% and 3% in the respective periods. The Company continues to expand its IRIDESSE stores, which focus on pearl jewelry.

Other financial highlights were as follows:

-- Gross profit as a percentage of net sales ("gross margin") was 55.1% in the second quarter versus 55.5% in the prior year due to increased product costs. Gross margin was 55.5% in the first half versus 54.7% a year ago due to a favorable shift in product sales mix, partly offset by increased product costs. The Company recorded LIFO inventory charges of $8,101,000 in the second quarter (versus $2,952,000 a year ago) and $9,467,000 in the first half (versus $4,169,000 in the prior year).

-- Selling, general and administrative ("SG&A") expenses rose 12% in the second quarter and 10% in the first half. As a percentage of net sales, SG&A expenses were 42.5% in the quarter (versus 41.4% a year ago) and 42.3% in the half (versus 41.1% in the prior year), with the increases largely reflecting higher store-related costs, as well as higher marketing-related costs in the first half.

-- Effective tax rates were 38.9% in the second quarter and 38.7% in the first half, compared with 28.0% and 31.5% in the prior year. The lower rates in the prior-year periods reflected the previously-mentioned AJCA tax benefits.

-- Net inventories at July 31, 2006 increased 16% from a year ago. This increase reflected inventories purchased or manufactured in anticipation of new store openings and expanded product assortments, higher precious metal costs and expanded internal manufacturing and diamond sourcing.

-- The Company repurchased and retired 2,525,135 shares of its Common Stock in the second quarter at a total cost of $83,839,000, or an average cost of $33.20 per share. In the first half, the Company repurchased and retired 4,704,407 shares of its Common Stock at a total cost of $163,589,000, or an average cost of $34.77 per share. In a separate announcement today, the Company reported that its Board of Directors has extended the expiration date of its current repurchase program and authorized up to an additional $700 million for repurchases. Including this additional authorization, there is approximately $813 million available for future repurchases through December 2009.

-- At July 31, 2006, the Company's balance sheet included: cash and cash equivalents of $146,941,000 (versus $128,611,000 a year ago), short-term and long-term debt totaling $572,306,000 (versus $404,263,000 a year ago) and stockholders' equity of $1,760,551,000 (versus $1,693,975,000 a year ago). Total debt as a percentage of stockholders' equity was 33% at July 31, 2006 (versus 24% a year ago).

Michael J. Kowalski, chairman and chief executive officer, said,"We anticipated these first half results due to above-average expensegrowth, but they do not reflect Tiffany's historical performance orearnings power. Our ongoing plans for store openings and new productintroductions sustain our confidence in Tiffany's ability to achievehigher rates of growth over the long-term."

He added, "Comparable store sales in August-to-date include areturn to mid-single-digit growth in the U.S., double-digit growth inmany international markets and a high-single-digit decline in Japan.For this third quarter, we are looking for a mid-single-digit increasein earnings before income taxes, and net earnings approximately equalto last year's 16 cents per diluted share which had benefited from alower effective tax rate due to favorable reserve adjustments relatedto the expiration of certain statutory periods."

"Our expectation for the full year calls for a low-double-digitincrease in earnings before income taxes for 2006 and net earnings ina range of $1.77 - $1.82 per diluted share. This projection assumes:high-single-digit net sales growth, including mid-single-digitcomparable store sales growth in the U.S. and low-single-digit growthin Japan along with greater increases in other international regions;gross margin approximately equal to the prior-year; andhigh-single-digit SG&A expense growth," Mr. Kowalski said.

Today's Conference Call

The Company will host a conference call today at 8:30 a.m. (EST)to review these results and its outlook. Investors may listen to thecall at www.tiffany.com (click on "About Tiffany," "ShareholderInformation," "Conference Call") and www.streetevents.com.

Next Scheduled Announcement

The Company anticipates reporting its third quarter results onNovember 29, 2006 with a conference call at 8:30 a.m. (EST) that day,to be broadcast at www.tiffany.com and www.streetevents.com. Toreceive future notifications for conference calls and/or news releasealerts, please register at www.tiffany.com (click on "About Tiffany,""Shareholder Information," "Calendar of Events" and "News by E-Mail").

Company Description

Tiffany & Co. operates jewelry and specialty retail stores andmanufactures products through its subsidiary corporations. Itsprincipal subsidiary is Tiffany and Company. The Company operatesTIFFANY & CO. retail stores and boutiques in the Americas,Asia-Pacific and Europe and engages in direct selling throughInternet, catalog and business gift operations. Other operationsinclude consolidated results from ventures operated under trademarksor tradenames other than TIFFANY & CO. For additional information,please visit www.tiffany.com or call our shareholder information lineat 800-TIF-0110.

This document contains certain "forward-looking" statementsconcerning the Company's objectives and expectations with respect tosales, store openings, gross margins, expenses, earnings, earnings pershare and assets. Actual results might differ materially from thoseprojected in the forward-looking statements. Information concerningrisk factors that could cause actual results to differ materially isset forth in the Company's 2005 Annual Report on Form 10-K and inother reports filed with the Securities and Exchange Commission. TheCompany undertakes no obligation to update or revise anyforward-looking statements to reflect subsequent events orcircumstances.
TIFFANY & CO. AND SUBSIDIARIES
(Unaudited)

NON-GAAP MEASURES
-----------------

The Company reports information in accordance with U.S. GenerallyAccepted Accounting Principles ("GAAP"). Internally, managementmonitors the sales performance of its international stores andboutiques on a non-GAAP basis that eliminates the positive or negativeeffects that result from translating international sales into U.S.dollars ("constant-exchange-rate basis"). Management believes thisconstant-exchange-rate measure is a more representative assessment ofthe sales performance of its international stores and boutiques andprovides better comparability between reporting periods.

The Company's management does not, nor does it suggest thatinvestors should, consider such non-GAAP financial measures inisolation from, or as a substitute for, financial information preparedin accordance with GAAP. The Company presents such non-GAAP financialmeasures in reporting its financial results to provide investors withan additional tool to evaluate the Company's operating results.

The following tables reconcile sales percentage increases(decreases), versus the prior year, from the GAAP to the non-GAAPbasis:
Second Quarter 2006 vs. First Half 2006 vs.
2005 2005
------------------------- -------------------------
Constant- Constant-
Trans- Exchange- Trans- Exchange-
GAAP lation Rate GAAP lation Rate
Reported Effect Basis Reported Effect Basis
------------------------- -------------------------
Net Sales:
----------
Worldwide 9% (1%) 10% 7% (2%) 9%
U.S. Retail 8% - 8% 5% - 5%
International
Retail 10% (2%) 12% 12% (4%) 16%
Japan Retail 1% (5%) 6% 3% (8%) 11%
Other Asia-
Pacific 23% 2% 21% 21% - 21%
Europe 19% 3% 16% 18% (3%) 21%

Comparable Store Sales:
-----------------------
Worldwide 6% - 6% 4% (1%) 5%
U.S. Retail 5% - 5% 2% - 2%
International
Retail 8% (2%) 10% 8% (5%) 13%
Japan Retail (3%) (5%) 2% (1%) (8%) 7%
Other Asia-
Pacific 28% 1% 27% 24% - 24%
Europe 20% 3% 17% 17% (3%) 20%



TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share amounts)


Three Months Six Months
Ended July 31, Ended July 31,
------------------- ----------------------
2006 2005 2006 2005
--------- -------- ---------- ----------
Net sales $ 574,940 $526,701 $1,114,181 $1,036,602

Cost of sales 257,962 234,617 496,077 469,697
--------- -------- ---------- ----------

Gross profit 316,978 292,084 618,104 566,905

Selling, general and
administrative expenses 244,342 218,016 471,221 426,526
--------- -------- ---------- ----------

Earnings from operations 72,636 74,068 146,883 140,379

Other expenses, net 5,307 3,858 9,282 8,064
--------- -------- ---------- ----------

Earnings before income taxes 67,329 70,210 137,601 132,315

Provision for income taxes 26,185 19,659 53,315 41,706
--------- -------- ---------- ----------

Net earnings $ 41,144 $ 50,551 $ 84,286 $ 90,609
========= ======== ========== ==========


Net earnings per share:

Basic $ 0.30 $ 0.35 $ 0.60 $ 0.63
========= ======== ========== ==========

Diluted $ 0.29 $ 0.35 $ 0.59 $ 0.62
========= ======== ========== ==========


Weighted-average number of
common shares:

Basic 139,170 142,989 140,556 143,618
Diluted 141,177 144,930 142,896 145,533



TIFFANY & CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)


July 31, January 31, July 31,
2006 2006 2005
----------- ----------- -----------
ASSETS
------

Current assets:
Cash and cash equivalents $ 146,941 $ 393,609 $ 128,611
Accounts receivable, net 143,446 142,294 126,000
Inventories, net 1,236,995 1,060,164 1,066,371
Deferred income taxes 80,404 69,576 72,084
Prepaid expenses and other current
assets 62,410 33,200 51,991
---------- ---------- ----------

Total current assets 1,670,196 1,698,843 1,445,057

Property, plant and equipment, net 904,479 866,004 916,374
Other assets, net 212,351 212,425 139,237
---------- ---------- ----------

$2,787,026 $2,777,272 $2,500,668
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Short-term borrowings $ 142,215 $ 38,942 $ 22,966
Current portion of long-term debt 6,272 6,186 -
Accounts payable and accrued
liabilities 199,301 202,646 178,322
Income taxes payable 31,467 60,364 20,510
Merchandise and other customer
credits 57,577 56,472 51,491
---------- ---------- ----------

Total current liabilities 436,832 364,610 273,289

Long-term debt 423,819 426,548 381,297
Postretirement/employment benefit
obligations 42,876 41,982 40,778
Deferred income taxes 935 - 9,790
Other long-term liabilities 122,013 113,219 101,539
Stockholders' equity 1,760,551 1,830,913 1,693,975
---------- ---------- ----------

$2,787,026 $2,777,272 $2,500,668
========== ========== ==========