Tiffany affected by the Dollar and Japan

Tiffany & Co. (NYSE: TIF) reported its results for the three month period («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. Management maintained its earnings guidance for the year ending January 31, 2016, as specified in the Company’s news release on March 20th.

In the first quarter, 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 (see «Non-GAAP Measures» schedule), 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.

Frederic Cumenal, chief executive officer, said, «We started the year facing well-known challenges from both global economic uncertainties and the effect of a strong U.S. dollar on the translation of foreign-denominated sales into dollars and on foreign tourist spending in the U.S., as well as a difficult sales comparison in Japan. Despite those factors, our first quarter results for net sales, as well as for gross margin and net earnings, were somewhat better than we anticipated. First quarter highlights also included the continuing success of the stylish TIFFANY T jewelry collection, as well as the launch of our extraordinary CT60™ watch collection.»

For the fiscal year ending January 31, 2016, management continues to forecast minimal growth in net earnings per diluted share from the $4.20 (excluding charges) earned in fiscal 2014. This forecast anticipates net earnings in the second quarter declining at a more moderate rate than in the first quarter, followed by expected double-digit percentage net earnings growth in the second half of the year.

This forecast reflects no material changes from the previously-disclosed (on March 20, 2015) assumptions for sales growth, store openings, earnings from operations, interest and other expenses, net, the effective tax rate, net inventories, capital expenditures and free cash flow, all of which are approximate and may or may not prove valid.

Mr. Cumenal added, «Our plans this year include expanding existing jewelry collections with new designs and opening stores in a number of important markets, all intended to further enhance Tiffany’s position as a leading global luxury brand. Despite these plans and the better-than-expected first quarter results, our forecast for minimal earnings growth for the full year continues to reflect caution regarding our expectations for fiscal 2015 in light of the strong dollar and other global economic uncertainties. However, we believe we can return to a healthier rate of double-digit EPS growth over the long-term.»