Earnings Call Excerpt
Here’s the entire text of the prepared remarks from Tiffany’s (ticker: TIF) Q3 2005 conference call. The company did not hold a Q&A session. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.
Executives:
Mark Aaron, VP-IR
Jim Fernandez, EVP, Chief Financial OfficerPresentation
Operator
Good day, everyone and welcome to the Tiffany & Company’s Third Quarter Earnings Conference Call. Today's call is being recorded. Participating on the call are 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, VP-IR
Thank you. Good morning, and thank you for joining us on this third quarter earnings conference call, on which Jim and I will review the results we reported today as well as Tiffany's near term outlook. Before continuing please note Tiffany's Safe Harbor provision as follows 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 2004 annual report and in Forms 10-K, 10-Q, and 8-K 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, let's proceed.
As an overview, sales growth of 8% in the third quarter reflected a continuation of strong U.S. comp store sales growth, and continued progress with our business in Japan. We were also pleased to achieve a higher operating margin in the quarter which game from a gross margin increase. Combined with a lower effective tax rate, net earnings rose 37% in the third quarter and we maintained our previously reported expectation for the range of earnings for the full year. Our balance sheet strengthened in the quarter, and we announced some important initiatives.
Let's first look at sales performance by channel of distribution. U.S. retail sales increased 9% in the quarter, due to 7% comp store sales growth, as well as solid contributions from several new stores. This comp performance was in line with our mid to high single digit expectation and compared with a 4% comp increase in last year's third quarter. In terms of the monthly trend, U.S. comp store sales rose 5% in August, on top of a 3% increase in August 2004, rose 8% in September on top of a 6% prior year increase, and rose 8% in October on top of a 5% prior year increase. From a geographical perspective, the 7% U.S. comp increase in the quarter was generated by 12% growth in the New York flagship store, which was on top of a 1% increase in the prior year, and a 6% increase in comparable brand store sales which was on top of a 5% prior year increase. The 7% comp increase was geographically broad based, ranging from an 8% comp increase in the entire New York region, to a 9% comp increase in California. Although lower tourist spending led to some softness in Hawaii.
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