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Tiffany's 2Q sales down 16 percent

August 28, 2009

New York--Sales were down 16 percent in the second quarter 2009 for Tiffany and Co., according to a financial report released Friday by the New York-based jewelry retailer.

Overall, second-quarter sales totaled $612.5 million, down from $729.6 million in the second quarter 2008, a 14-percent drop at constant exchange rates. Same-store sales fell 16 percent on a constant-exchange-rate basis, according to a press release.

Sales in the six-month (first half) period totaled $1.13 billion, a 19 percent decline (16 percent on a constant-exchange rate basis), while first-half same-store sales dropped 18 percent on a constant-exchange-rate basis.

On a regional basis, second-quarter sales in the Americas dropped 23 percent to $324.9 million in the second quarter and 27 percent to $583.9 million in the first half.

Same-store U.S. sales were down 27 percent in the second quarter--a big drop compared to second quarter 2008, when they were down only 4 percent, but an improvement over the first quarter 2009, when same-store sales slid 34 percent. In the first half, U.S. same-store sales fell 30 percent.

Internet and catalog sales fared better than in-store sales, falling 8 percent in the second quarter and 12 percent in the first half.

Europe and Asia experienced more modest sales declines: Sales fell 1 percent in the second quarter and 5 percent in the first half of the year in the Asia-Pacific region, while sales slipped 4 percent in the second quarter and 6 percent in the first half, in Europe.

"Other sales" for the company, which includes wholesale diamond sales, declined 66 percent in the second quarter and 72 percent in the first half due to reduced demand for diamonds in the wholesale market. In its outlook, the company is expecting other sales to drop 50 percent.

"While economic and retail conditions remain challenging, we were encouraged to see many stores achieving either smaller year-over-year rates of sales declines or modest sales growth compared with the past two quarters," Tiffany Chairman and Chief Executive Officer Michael J. Kowalski said in a statement. "More importantly, Tiffany's strong financial and operating position allows us to continue to expand our global presence in pursuit of robust, long-term growth."
 
Looking more closely at U.S. same-store sales, Tiffany's results show that branch-store sales declined 26 percent in the second quarter and 29 percent in the first half, while the New York flagship store--no longer buoyed by an influx of foreign tourists-- saw sales slide 30 percent and 36 percent.

During an earnings call held Friday morning, Tiffany Vice President of Investor Relations Mark Aaron said the new stores Tiffany has opened recently "continue to perform well."

In addition, he said that due to customer demand, Tiffany has added a "representative engagement ring assortment" to the inventory at its new format store in Glendale, Calif.

The store, which opened in late 2008, is smaller than Tiffany's usual stores, features lower price-point items and allows the customers to interact with the merchandise independently, without the assistance of a sales person.

Aaron said that Tiffany has plans to open another of these alternative format stores in Seattle's University Village next week.

On a product-by-product basis, Aaron said fashion gold and silver continue to be the stronger sellers for Tiffany and Co. while diamond engagement ring sales are in line with overall company sales and sales of designer jewelry have dropped below the company average.

He also noted that the "Keys" jewelry collection, with pieces priced between $150 and $15,000, is doing well.

"It has enjoyed a stellar start," he says.

The retailer has plans to launch new watch designs in the third quarter.
For the full year, management forecasts worldwide sales to drop 10 percent, including a mid-teens percentage drop in the Americas and a low-single-digit percentage drop in Europe and Asia.

As of July 31, Tiffany and Co. operated a total of 211 stores worldwide.
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