Earnings Call Excerpt
Tiffany & Co. (TIF)
F2Q06 Earnings Call
August 31, 2006 8:30 am ET
Executives
Mark Aaron - Vice President, Investor Relations
Jim Fernandez - Executive Vice President, Chief Financial Officer
Presentation
Operator
Good day, everyone, and welcome to this Tiffany & Company second quarter earnings release conference call. Today’s call is being recorded. Participating on today’s call is the Vice President of Investor Relations, Mr. Mark Aaron, and the Executive Vice President and Chief Financial Officer, Mr. Jim Fernandez.
At this time, I would like to turn the call over to Mr. Mark Aaron. Please go ahead, sir.
Mark Aaron
Thank you. Good morning, and thanks for joining us on this conference call. We reported Tiffany’s second quarter results earlier today and hopefully you have had a chance to review the press release.
Before continuing, please note Tiffany’s Safe Harbor provision that statements made on this call that are not historical facts are forward-looking statements. Actual results might differ materially from the expectations projected in those forward-looking statements. Additional information concerning risk factors that could cause actual results to differ materially is set forth in Tiffany’s 2005 report on Form 10-K and in other reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Now we can proceed.
In the second quarter, Tiffany’s net sales increased 9% and we achieved solid sales growth in a number of markets. As we expected, a lower gross margin and higher expense ratio affected results. However, we said on our first quarter conference call that we expected virtually no pre-tax earnings growth in the second quarter and the results we issued today met that expectation.
Also in the past few months, we opened stores in exciting U.S. and international markets, we announced plans for some others, and we introduced a number of new products. The Board of Directors increased the dividend for the fourth consecutive year, and we again repurchased a considerable amount of stock.
Let’s first look at our sales performance by channel of distribution in the second quarter.
U.S. retail sales rose 8% in the quarter, primarily due to 5% comparable store sales growth, as well as results from several new stores. The 5% comp store sales growth was on top of a 6% increase in last year’s second quarter. In terms of the monthly trend during the quarter, comps rose 6% in May, increased 8% in June, and declined 1% in July. In last year’s second quarter, comps had increased 7% in May, 6% in June, and 4% in July.
- We will soon complete a remerchandising of our Ginza flagship store and will highlight the change with a special bridal event, and the introduction of the Tiffany Novo Collection, a new brilliant cushion cut solitaire diamond ring. Building on our successful engagement jewelry business, Tiffany Novo will be exclusive to the Ginza flagship store in September and then rollout to the rest of Japan in October, followed by other international markets and the U.S. in early 2007;
- A complete renovation of Tiffany’s boutique in Mitsukoshi’s Ginza store will be completed in September, as part of Mitsukoshi’s overall renovation of that important store. We expect sales results to benefit from these initiatives.
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