Company increases year forecast; statement jewels drive global sales.
Tiffany & Co. has reported growth in its net earnings for the Q2 and H1 periods ending July 31, with European sales up 11%, driven by strength in the UK market.
According to the figures, Tiffany‘s total sales in Europe rose 11% to $111 million (£71.6m) in the second quarter, and 9% to $204 million (£131m) in H1. On a constant-exchange-rate basis, total sales rose 10% and 9% in the respective periods and comparable store sales rose 7% and 6% due to sales growth in the UK and most of continental Europe.
The US brand said its increase in net earnings in Q2 reflects sales growth and an improved operating margin. As a result of better-than-expected earnings in the quarter Tiffany’s management has increased its full year forecast.
In the three months ending July 31, 2013 Tiffany’s worldwide net sales rose 4% to $926 million (£597m). On a constant-exchange-rate basis, worldwide net sales rose 8%, and comparable store sales rose 5% due to growth in most regions.
Tiffany’s net earnings increased 16% to $107 million (£69m), or $0.83 per diluted share, compared with $92 million (£59m) and $0.72 per diluted share in the prior year.
With a view to H1, the brand’s worldwide net sales increased 7% to $1.8 billion (£1.2bn). On a constant-exchange-rate basis, sales rose 10% with comparable store sales increasing 7%. Its net earnings rose 10% to $190 million (£122m), or $1.48 per diluted share, from $173 million (£112m), or $1.36 per diluted share, in the prior year.
Tiffany & Co. chairman and chief executive Michael J. Kowalski said: "Total sales growth met our objective due to solid performance in most regions, and with particular strength in our statement and fine jewellery product categories. We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin."
In the Americas region, total sales increased 2% to $444 million (£286m) in the second quarter and 4% to $852 million (£550m) in the first half. On a constant-exchange-rate basis, total sales also rose 2% and 4% in the respective periods; comparable store sales were unchanged in the quarter and rose 1% in the half, led by growth in Tiffany’s New York flagship store sales.
Total sales in the Asia-Pacific region rose 20% to $208 million (£134m) in the second quarter and 17% to $432 million (£278m) in the first half. On a constant-exchange-rate basis, total sales also rose 20% and 17%, and comparable store sales increased 13% and 11% in the respective periods, led by especially strong sales growth in Greater China.
The negative translation effect from a substantially weaker yen caused total sales in Japan to decline 14% to $136 million (£87m) in the second quarter and 7% to $281 million (£181m) in the first half. However, on a constant-exchange-rate basis, total sales increased 7% in the second quarter and 14% in the first half, due to comparable store sales growth of 8% and 14% with strong growth in engagement and higher-end jewellery categories.
During Q2, Tiffany opened three stores: Hong Kong, Verona in Italy and in Villahermosa in Mexico. The company closed one store in Tokyo, Japan. As of July 31, Tiffany operated 277 stores worldwide, 116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and five in the UAE, versus 260 stores a year ago.
Kowalski added: "We are pleased to have achieved healthy earnings growth in the first half of the year. Looking forward, we are equally excited about the initiatives we are pursuing in product development, marketing communications and store expansion, all intended to further enhance Tiffany’s strong brand position and take fuller advantage of its long-term growth opportunities in the global luxury market."
Looking ahead, for the fiscal year ending January 31, 2014, Tiffany management now forecasts net earnings in a range of $3.50-$3.60 per diluted share, compared with $3.43-$3.53 per diluted share in its previous outlook and $3.25 per diluted share in 2012.
This forecast is based on the possibility of, among other things, worldwide net sales increasing by a mid-single-digit percentage in US dollars, the addition of a net of 14 company-operated stores, including three in Europe, and operating earnings increasing at a higher rate than sales growth.