US jeweller Tiffany’s & Co presented its results for 2006, with net sales up 11 percent to $2.65 billion (£1.35 billion). The company attributed the increase to growth in the US and international markets, except Japan , where sales continued to be weak. Operational profits for the year rose 9 percent, while net earnings experienced a slight dip of 0.3 percent to $254 million. International retail sales reached the $1 billion mark, an increase of 12 percent. US retail sales gained 9 percent to $1.33 billion.
By the end of the fiscal year the company counted 167 Tiffany stores, an 8 percent increase on the year before. Net earnings in the fourth quarter remained essentially flat at $140.5 million on net sales up 15 percent to $986 million. Net income was affected by a charge in the fourth quarter related to the company’s subsidiary Little Switzerland.
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“We concluded 2006 with strong sales, giving us every reason to believe that Tiffany remains well-positioned to achieve solid sales and earnings growth in 2007 and beyond,” said chairman and chief executive Michael J. Kowalski. He outlined an objective of net sales growth of 11 to 12 percent, adding that the Tiffany’s planned to open 17 new stores and boutiques this year, signifying an increase of 10 percent.
“We are now almost two months into the first quarter, and note that total worldwide net sales are slightly above our growth expectations,” he continued. “At the same time, we are seeing a greater than expected shift in sales mix toward higher-end, lower-margin diamond jewellery. Given all that, we believe that earnings are currently on track to achieve our expectations for the first quarter.”
Analyst Melissa Otto at WR Hambrecht & Co maintained a hold recommendation for the company. “We think Japan will continue to be soft and challenging for the company, ” she wrote in a research note, adding that she believes Japan – which is Tiffany’s third largest market – will take three years to turnaround. “While the company is making an effort to improve (sales), we think Tiffany’s store experience and sales style lags behind its competitors.” Otto anticipates that Europe and Asia will continue to grow at a much faster rate than Japan and the US. On a more positive note, she concluded: “International revenues outside of Japan represent 20 percent of the company’s total revenues, and we expect that percentage to edge higher as it continues to focus on growing its brand in other regions.”