Tiffany & Co., the iconic New York luxury jewelry firm forever associated with Audrey Hepburn, reported financial results for the second quarter and its first half that beat analysts' expectations and affirmed the strength of sales outside the USA, especially in China.
The buoyant results prompted Tiffany's management to increase its full-year earnings outlook. In summary, Tiffany's reported a 12 percent jump in worldwide sales; a huge 26 percent spike in net earnings and a $266 million stock buyback.
Tiffany's said higher earnings in both Q2 and H1 were the end products of broad-based growth in worldwide sales. Also contributing to the company's upbeat financial results were the increase in gross margins and lower effective tax rates, which was partly reduced by higher investment spending. On the whole, these better-than-expected results led Tiffany's management to boost its net earnings outlook for the full year ending January 31, 2019.
Second quarter results were uplifting: worldwide net sales increased 12 percent to $1.1 billion, while net earnings leaped 26 percent to $145 million from $115 million year-on-year. The company said the rise in worldwide net sales reflected geographically broad-based growth and sales increases in all product categories
Results for the first half were equally positive. Worldwide net sales rose 13 percent to $2.1 billion, again due to broad-based growth in the company's worldwide locations and sales increases in all product categories. Comparable sales saw a rise of nine percent. Based on a constant-exchange-rate basis, worldwide net sales increased 11 percent while comparable sales rose seven percent.
Net earnings ballooned 38 percent to $287 million ($2.31 per diluted share) from $208 million ($1.66 per diluted share) year-on-year.
CEO Alessandro Bogliolo said Tiffany's is pleased with its sales and earnings growth, and the strength and breadth of the results in the first half of 2018. He said it's worth noting that strategic investment spending will rise for the remainder of the year. This boost is intended to support longer-term sustainable growth.
As for the longer-term horizon, Bogliolo said Tiffany's is very excited about the new transformative multi-year remodeling of the New York City flagship building, which was featured in the Audrey Hepburn movie. He was also happy with initial customer reactions to Tiffany's new communication, product and in-store initiatives, such as "Paper Flowers," a floral collection in platinum and diamonds, and "Tiffany True," an innovative diamond ring concept.
The Americas and Asia were the gold mines for Tiffany's in the periods under review. Total net sales in the Americas improved eight percent to $475 million in the second quarter and eight percent to $900 million in the first half. Sales rose across most company locations in the Americas. Management said the growth was mostly due to higher spending by local customers.
The Asia-Pacific saw total net sales jump 28 percent to $301 million in the second quarter, and 28 percent to $629 million in the first half. These positive outcomes reflected the opening of new stores and larger wholesale sales.
The higher sales growth across Greater China and most other markets in the region were due largely to more spending by local customers and, to a lesser extent, on spending by foreign tourists. In Japan, total net sales rose 11 percent to $155 million in the second quarter and 14 percent to $305 million in the first half.
In Europe, total net sales increased five percent to $121 million in the second quarter and nine percent to $228 million in the first half. These results reflected the positive effects from currency translation, as well as sales in new stores
