Tiffany's worldwide net sales Increases by 7%; Witnesses a dull 4th Quarter

Net earnings in the full year also benefitted from a lower effective tax rate and rose to $586 million, or $4.75 per diluted share. Management provided expanded guidance for the full year ending January 31, 2020 (“fiscal 2019”) that was consistent with preliminary guidance reported on January 18, 2019.

In the full year:

• Worldwide net sales rose 7% to $4.4 billion, and comparable sales rose 4%. 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 and comparable sales rose 6% and 4%, respectively.
• Net earnings were $586 million, compared with $370 million in the prior year; net earnings per diluted share were $4.75, versus $2.96 a year ago. Net earnings in 2018 benefited from a lower effective income tax rate, which included a $16 million benefit, or $0.13 per diluted share, resulting from adjustments recorded in 2018 to the net charge of $146 million, or $1.17 per diluted share, recorded in the fourth quarter of 2017 related to the enactment of the 2017 U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”). A higher gross margin in 2018 was more than offset by increased Selling, general and administrative expenses partly tied to strategic investment spending that was initiated in 2018.

In the fourth quarter:

• A 1% worldwide net sales decline to $1.3 billion was generally consistent with holiday results previously reported on January 18^th and was attributed by management to softer demand by local customers and foreign tourists across most regions and product categories, and which management believes was affected, in part, by external events, uncertainties and market volatilities; comparable sales also declined 1%. On a constant-exchange-rate basis, worldwide net sales rose 1% and comparable sales were unchanged.
• Net earnings of $205 million compared with $62 million a year ago; net earnings per diluted share were $1.67 versus $0.50 in last year’s fourth quarter. Net earnings in 2018 benefited from a lower effective income tax rate, which included an $8 million benefit, or $0.07 per diluted share, resulting from adjustments recorded in the fourth quarter of 2018 to the net charge of $146 million, or $1.17 per diluted share, recorded in the fourth quarter of 2017 related to the 2017 Tax Act, as described above.

Alessandro Bogliolo, Chief Executive Officer, said, “Our team is proud of its accomplishments in 2018 that contributed to net sales surpassing levels not seen since 2014. Softer trends in the second half of the year reflected, in part, what we believe were external challenges and uncertainties.”

He added, “Most important, we are still in the early stages of a journey to achieve long-term sales, margin and earnings growth for this legendary brand, and are making progress across our six key strategic priorities: Amplifying an evolved brand message; Renewing our product offerings and enhancing in-store presentations; Delivering an exciting omnichannel customer experience; Strengthening our competitive position and leading in key markets; Cultivating a more efficient operating model; and Inspiring an aligned and agile organization to win. I continue to strongly believe that Tiffany has vast global growth opportunities and we look forward to realizing our full potential in the future.”

In Asia-Pacific, total net sales increased 13% to $1.2 billion in the full year (due to growth in Greater China and most of the other countries in the region) and declined 1% to $316 million in the fourth quarter (reflecting sales growth in mainland China and mixed results elsewhere). Management attributed the sales growth to higher spending by local customers in both periods and to foreign tourists and wholesale travel-retail sales in Korea in the full year. Comparable sales rose 5% in the full year and declined 3% in the fourth quarter. On a constant-exchange-rate basis, total sales rose 13% in the full year and 2% in the fourth quarter, and comparable sales increased 5% in the full year and were unchanged in the fourth quarter.