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Tiffany reported Q1 earnings this morning. The Q1 EPS was $0.70 a share, which a an $0.18 beat of the consensus estimates. TIF is up ~ 4.5% on the report.

Tiffany & Co. (TIF) today reported financial results for the first quarter ended April 30, 2013. Worldwide net sales increased 9% and net earnings rose 3%. In addition, management maintained its fiscal 2013 forecast.

In the three months (first quarter) ended April 30, 2013:

• Worldwide net sales increased 9% to $895 million. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see Non-GAAP Measures schedule), worldwide net sales increased 13% and comparable store sales rose 8%.

• Net earnings increased 3% to $84 million, or $0.65 per diluted share, versus the prior years $82 million, or $0.64 per diluted share. Expenses of $9 million, or $0.05 per diluted share, were recorded in the quarter for recent staff and occupancy reductions; excluding those costs, net earnings increased 10% to $89 million, or $0.70 per diluted share (see Non-GAAP Measures schedule).


Net sales highlights were as follows:

• In the Americas region, total sales rose 6% to $408 million. On a constant-exchange-rate basis, total sales increased 6%; comparable store sales rose 3% with relatively stronger growth in the New York flagship store. Sales in New York benefitted from purchases by customers who attended the Blue Book event.

• In the Asia-Pacific region, total sales of $223 million were 15% higher than a year ago. On a constant-exchange-rate basis, total sales increased 14%, due to sales growth in Greater China and most other countries, and comparable store sales rose 9%.

• Total sales in Japan increased 2% to $145 million despite a negative translation effect from a weakening yen. On a constant-exchange-rate basis, total sales increased 20% and comparable store sales rose 21% due to particularly strong growth in Tiffanys engagement and higher-end jewelry categories.

• In Europe, total sales of $93 million were 6% higher than last year due to sales growth across continental Europe. On a constant-exchange-rate basis, total sales and comparable store sales rose 8% and 6% respectively.

• Other sales tripled to $27 million from $9 million in the prior year, primarily reflecting the conversion in July 2012 of five TIFFANY & CO. stores in the United Arab Emirates from independently-operated to Company-operated.

• In the first quarter, Tiffany opened one store, in Xian, China and closed one in Taichung, Taiwan. At April 30, 2013, the Company operated 275 stores (115 in the Americas, 66 in Asia-Pacific, 55 in Japan, 34 in Europe and five in the U.A.E.), compared with 251 stores (105 in the Americas, 59 in Asia-Pacific, 55 in Japan and 32 in Europe) a year ago.

Other financial highlights:

• Gross margin (gross profit as a percentage of net sales) was 56.2% versus last years 57.3%. As expected, the decline continued to reflect a shift in sales mix toward higher-priced, lower gross margin products. In addition, gross margin, in comparison to recent quarters, benefitted from diminished product cost pressure and recent price increases.

• SG&A (selling, general and administrative) expenses increased 8% in the quarter. The increase included $9 million of expenses tied to cost reduction initiatives related to staffing reductions, as well as subleasing of office space at a loss; excluding such costs, SG&A expenses would have increased 6% (see Non-GAAP Measures schedule) due to new store-related costs and higher marketing spending for the Blue Book event.

• Other expenses, net were $13 million this year, versus last years $11 million, primarily due to increased interest expense related to higher average borrowing levels.

• The effective income tax rate was 34.9% compared with 34.5% last year.

• The Company had cash and cash equivalents of $465 million at April 30, 2013, versus $322 million in the prior year. Short-term and long-term debt totaled $974 million at April 30, 2013 and represented 37% of stockholders equity, compared with $834 million and 35% a year ago.

• Net inventories were $2.3 billion at April 30, 2013, or 4% higher than a year ago. A 12% increase in finished goods inventories to support new store openings and expanded product assortments was partly offset by a 5% decline in combined raw material and work-in-process inventories. On a constant-exchange-rate basis, net inventories were 7% higher than a year ago.

Seeking alpha has posted the conference call here:

Bits that I found interesting and/or important on the call:

First, temper your enthusiasm… We're encouraged with the start of the year, but caution you to not draw overly optimistic conclusions from the first quarter, which generates a relatively small percentage of sales and earnings in comparison with annual results.

With regard to new store openings: We finished the quarter with 275 company-operated stores. Our plan is to open 16 stores this year and close 1 store each in Japan and Taiwan, resulting in a net addition of 14 locations. And we are renovating a number of existing locations as well. In the Americas, the 6 stores planned range from 3 in the U.S., including New Jersey's Garden State Plaza and Cleveland's Eaton Center; to a store in the West Edmonton Mall in Alberta, Canada; our 10th store in Mexico in Villahermosa; and our fifth store in Brazil in Curitiba. And we are excited to be relocating our Bloor Street store in Toronto to a nearby location this fall.

Seven stores are currently planned to open in the Asia-Pacific region, including 4 in China, one of which opened in Xi'an in the first quarter and there were 3 additional ones, which will take us to 26 stores in China by year-end. We're also working toward finalizing leases for 3 additional stores in the region. Rounding out expansion this year are 3 stores that are planned in Europe, which will bring us to 37 European stores by year-end.

And another dividend increase (which I missed apparently, as is seems they announced it a fe weeks ago): We remain committed to returning excess cash to stockholders. In fact, 2 weeks ago, our Board of Directors approved a 6% increase in the quarterly cash dividend rate going from $0.32 per share to a new rate of $0.34 per share and representing the 12th increase in the past 11 years.
There was no Q&A on the transcript – I’m not sure if there was one and it wasn’t transcribed yet or if they just to have them. If additional info is posted later, I’ll take a look.

All-in-all, a solid quarter for the Tiffany.

Long TIF
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