Tiffany Is Plunging After Bad Earnings And A Guidance Cut

Tiffany's, Wall Street

Photo: Richard Drew / AP

Luxury jeweler Tiffany just delivered some bad news and the stocks is off over 8 per cent in the pre-market.

Tiffany Report:

  • Worldwide net sales increased 8% to $819 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 rose 8% and comparable store sales rose 4%.
  • Net earnings increased 1% to $82 million, or $0.64 per diluted share, versus $81 million, or $0.63 per diluted share, in 2011.
  • Net earnings in the first quarter of 2011 had been reduced by $0.04 per diluted share for nonrecurring items related to the relocation of Tiffany’s New York headquarters staff (see “Non-GAAP Measures” schedule). Excluding those items, net earnings in the first quarter declined 5% from last year.

More on the outlook

Management’s outlook for the full year ending January 31, 2013 is based on the following assumptions (which may or may not prove valid and all of which are approximate):
                  a)           Worldwide net sales (in U.S. dollars) increasing 7-8%, versus the previous expectation calling for 10% growth.
            b)         Adding 24 Company-operated stores including nine in the Americas, eight in Asia-Pacific, two in Europe, and commencing operation of five stores in the United Arab Emirates. Four of these stores were opened in the first quarter.
            c)         The operating margin modestly below the prior year (excluding nonrecurring items recorded in 2011).
            d)         Interest and other expenses, net of approximately $55 million. This forecast now includes the expected cost of additional debt incurrence for working capital, repayment of maturing debt and general corporate purposes.
            e)         An effective income tax rate of 34 – 35%.
            f)         Net earnings per diluted share in a range of $3.70 – $3.80. This compares with the previous forecast of $3.95 – $4.05 per diluted share; approximately $0.20 of the decrease is tied to a reduction in operating expectations and $0.05 is related to the additional debt incurrence. All of the annual earnings growth over 2011 is expected to occur in the fourth quarter, with net earnings in the second and third quarters expected to be below last year.
            g)         Net inventories increasing 10%, versus a previous expectation of 15%.
            h)         Capital expenditures of $240 million.

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