Tiffany & Co. reported its results for the first quarter ended April 30, 2015. Net sales and earnings declines, albeit smaller than anticipated, reflected the negative effects from the strong U.S. dollar and a difficult year-over-year sales comparison in Japan.
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Management maintained its earnings guidance for the year ending January 31, 2016, as specified in the company's news release on March 20th.
Worldwide net sales of $962 million were 5% below the prior year. However, on a constant-exchange-rate basis excluding the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales rose 1% due to growth in all regions except Japan and driven by increased sales of fashion gold jewelry and statement jewelry; worldwide comparable store sales on that basis were 1% below last year.
Net earnings declined 17% to $105 million, or $0.81 per diluted share, compared with $126 million, or $0.97 per diluted share, a year ago, due to the lower sales as well as higher SG&A (selling, general and administrative) expenses primarily related to marketing spending.
Gross margin (gross profit as a percentage of net sales) increased to 59.1% from 58.2% in last year's first quarter. The change reflected benefits from favorable product input costs and price increases, as well as the absence of a one-time charge in the first quarter of 2014 for the closing of a diamond polishing facility.
These benefits were somewhat mitigated by a negative effect from geographical sales mix.
SG&A expenses increased 5%, largely due to higher marketing expenses as well as incremental expenses related to the company's U.S. pension and postretirement plans. The rate of overall SG&A expense growth was halved by the translation effect of the strong U.S. dollar.
Interest and other expenses, net declined to $9 million from $16 million in last year's first quarter. The decline was partly due to lower interest expense resulting from the redemption of long-term debt in October 2014 by using proceeds from the issuance of lower-rate long-term debt.
To a lesser extent, interest and other expenses, net declined due to changes in foreign currency transaction gains/losses.
The effective tax rate was 34.7%, compared with 35.1% in last year's first quarter.
Cash and cash equivalents and short-term investments were $715 million at April 30, 2015, compared with $381 million a year ago. Total short-term and long-term debt as a percentage of stockholders' equity was 37% and 35% at April 30, 2015 and 2014, respectively.
Net inventories of approximately $2.4 billion at April 30, 2015 were 2% lower than the prior year, but increased 2% excluding the translation effect of the strong U.S. dollar in support of new stores and product introductions.
Capital expenditures were $37 million, versus $35 million in last year's first quarter.
The company spent $33 million in the first quarter to repurchase approximately 380,000 shares of its common stock at an average cost of $87.16 per share. At April 30th, approximately $240 million remained authorized for repurchases under a $300 million, three-year program that expires in March 2017. ■