(IDEX Online) - Tiffany & Co. reported that its worldwide net sales increased 8% to $1.05 billion in the two month holiday period ended December 31, 2017 due to growth across regions and product categories, and comparable store sales rose 5%.
On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars worldwide net sales rose 6% with comparable store sales up 3%. Results in the holiday period have led management to increase its net earnings guidance for the year ending January 31, 2018. Management is also introducing a preliminary earnings outlook for fiscal 2018.
Alessandro Bogliolo, Chief Executive Officer, said, "We were pleased with the improvement in sales during the holiday period across regions and categories, both instore and online. While our major Fashion Jewelry collections continued to perform well, customers were equally excited about our Fine Jewelry, our Watches and our new Home and Accessories collection. Some exceptional High Jewelry creations further contributed to the sales performance. This recent return to growth in worldwide comparable store sales, fueled by a substantial improvement in the Americas and Asia Pacific, is consistent with our commitment to generate solid and sustainable growth in sales, operating margin and earnings that is at least comparable to our industry peers over the long-term."
He added, "However, while we are encouraged with the holiday sales results, we believe that the preceding negative comparable store sales trend can only be reversed on a sustainable basis by continuing to evolve our product offerings and customer experience and also by stepping up certain strategic spending in our business, all of which is reflected in our preliminary 2018 plans and earnings outlook. Nonetheless, our holiday period results confirm that the TIFFANY & CO. brand is strong, and we are excited about our numerous long-term global opportunities to capitalize on that strength."
Net sales by region and product categories in the holiday period were as follows:
In the Americas, total sales increased 7% to $516 million and comparable store sales rose 6%. Management noted varying degrees of growth across most of the U.S., Canada and Latin America with higher spending attributed primarily to local customers. On a constant-exchange-rate basis, there was a 6% increase in both total sales and comparable store sales.
In the Asia-Pacific region, total sales increased 16% to $232 million, due to a 7% increase in comparable store sales, new store openings and an increase in wholesale sales. Management attributed retail sales growth primarily to higher spending by local customers, and particularly noted growth in mainland China, Hong Kong and Korea. On a constant-exchange-rate basis, total sales and comparable store sales increased 13% and 4%, respectively.
In Japan, total sales increased 1% to $145 million and comparable store sales were unchanged. Management noted a difficult comparison to exceptionally strong growth in spending attributed to local customers in last year's holiday period. There was no currency translation effect on sales.
In Europe, total sales rose 14% to $136 million, reflecting the opening of new stores (some of which management believes had negative effects on existing store sales in those markets), and comparable store sales rose 2%. Management noted varying performance across the region with overall sales growth attributed to higher local customer spending. On a constant-exchange-rate basis, total sales increased 5% and comparable store sales declined 7%.
Other total sales declined 10% to $18 million; a 14% increase in comparable store sales was offset by a decline in wholesale sales of diamonds.
At December 31, 2017, the Company operated 316 stores (125 in the Americas, 87 in Asia-Pacific, 54 in Japan, 46 in Europe, and four in the UAE), versus 314 stores a year ago (125 in the Americas, 86 in Asia-Pacific, 55 in Japan, 43 in Europe, and five in the UAE).
Sales results across product categories ranged from the strongest growth in the High, Fine and Solitaire and the Fashion jewelry categories, to fractional growth in the Engagement Jewelry and Wedding Bands category.
Fiscal 2017 Outlook:
Management's outlook for fiscal 2017 now calls for: (i) worldwide net sales increasing over the prior year by approximately 4% as reported and on a constant-exchange-rate basis and (ii) net earnings per diluted share increasing by a double-digit percentage over 2016's net earnings per diluted share of $3.55 and by at least a high-single-digit percentage over 2016's net earnings per diluted share (excluding charges) of $3.75. These earnings expectations do not incorporate the effect of recent revisions to the U.S. tax code, including certain charges that management expects to record in the fourth quarter ending January 31, 2018. These revisions to the U.S. tax code will, among other effects, require the Company to re-measure its deferred tax assets, as well as incur a tax on foreign earnings deemed to be repatriated. Management currently estimates that such re-measurement and such deemed repatriation tax will result in aggregate charges of $115-$165 million in the quarter ending January 31, 2018. The actual amount of the re-measurement and deemed repatriation tax may differ from this estimate due to, among other factors, a change in interpretations of the applicable revisions to the U.S. tax code, changes in assumptions made in developing these estimates, as well as regulatory guidance that may be issued with respect to the applicable revisions to the U.S. tax code.
Fiscal 2018 Preliminary Outlook:
Management's preliminary view for fiscal 2018 calls for a mid-single-digit percentage increase in worldwide sales. Management also anticipates increased levels of spending in a number of areas, including technology, marketing communications, visual merchandising, digital, and store presentations, which it believes are necessary to achieve its longer term sales, margin and earnings growth objectives. As a result, management expects net earnings per diluted share to be flat to slightly down from the forecasted 2017 net earnings per diluted share noted in clause (ii) of the first paragraph set forth in "Fiscal 2017 Outlook" (which, for both years, does not include any effect from the recent tax code revisions). However, net earnings per diluted share in fiscal 2018 is expected to benefit, in an amount yet to be determined, from an expected lower effective income tax rate resulting from the recent revisions to the U.S. tax code. Management will provide additional information regarding its Fiscal 2018 outlook when it reports full year results in March.