Tiffany 3Q16 Earnings Call Notes

Tiffany (TIF) Q3 2016 Results

Mark Aaron – Vice President, Investor Relations

Sales in the US pressured by macro

“Sales in the U.S. were again pressured by lower spending attributable to local customers, which we believe was tied to macro, market and political uncertainties. Interestingly, spending by customers that we identify as foreign tourist actually rose in the quarter in contrast to a decline in the first half, as continued lower spending attributed to Chinese tourists was more than offset by increased spending attributed to visitors from Japan and elsewhere.”

Effect of Trump on 5th Ave store

“There certainly has been a lot of attention focused on the potential effect of activities related to the recent U.S. Presidential Election on stores along the relevant part of Fifth Avenue. What we’ve seen has been some adverse effect on traffic in our Flagship store, as well as the continuation of sales softness relative to last year and to our other U.S. stores this year. Because of obvious uncertainty, we will maintain a cautious outlook in the near-term and we cannot provide any assurance that sales in these both in the fourth quarter and beyond will not be negatively affected.”

Soft demand across Europe

“Demand across Continental Europe remained soft, although, varying degrees and has been especially soft in Paris since the tragic events of last year. Economic conditions also likely contributed to weak spending by domestic customers in many countries.”

Fashion jewelry strongest, statement jewelry weakest

“The best performing jewelry category was fashion jewelry, which posted a modest increase over last year. This was driven by an increase in gold jewelry sales tied to the strength of the T collection, which we have continued to build upon with new designs… At the other extreme was continued softness across the statement, fine and solitaire jewelry category, led by decline in high-end statement sales, which in contrast had posted strong growth last year, performing roughly in line with the prior year on a worldwide basis was the engagement jewelry and wedding bands category, with results varying by region.”

Tiffany 2Q16 Earnings Call Notes

Tiffany’s (TIF) Management on Q2 2016 Results

Mark Aaron

6% decrease in sales in line with what we anticipated

“Worldwide sales were close to what we anticipated, declining 6% on both a GAAP basis and on a constant exchange rate basis, and generally continued to reflect the soft trends across regions that we’ve experienced for several quarters, which we attribute partly to domestic customer spending, but also to lower tourist spending, predominantly by Chinese tourists. However, we had a solid increase in gross margin and experienced less deleveraging of SG&A expenses than we had anticipated due to a slight SG&A expense decline, and our balance sheet remains strong. Looking forward, while the results for the quarter were a little better than we expected, we think it’s prudent to maintain our existing outlook for the full year. ”

Decline reflected softness in all regions

“So looking at second quarter sales results in more detail, the 6% decline in worldwide sales reflected varying degrees of softness in all regions. There was no translation effect on total sales as the stronger yen offset the negative translation effects from the stronger US dollar against other currencies. In the Americas, both total sales and comparable-store sales declined 9%, which we attribute to generally soft demand in US customer spending, as well as lower spending in the US by Chinese and other tourists, especially in New York and in other high tourism markets.”

We believe macro and political uncertainties softening high end

“We can only speculate on why domestic US consumer spending at the high end has been generally soft, but we believe that macro market and political uncertainties are likely playing a role in restrained consumer behavior.

Softness in asia but strength in China

“In the Asia Pacific region, total sales and comparable-store sales declined 6% and 12% in the quarter. The sales declines were due to a combination of lower average price, lower unit volume, and a shift in mix and reflected softness across much of the region. We were pleased with healthy total and comparable store sales growth in China, as well as in Korea. However, continued meaningful sales declines in Hong Kong, Taiwan, Macau, and Singapore contributed to the overall regional softness.”

Interestingly saw an uptrend in sales following the vote

“There’s obviously uncertainty and anxiety regarding the economic implications of Brexit, but, interestingly we saw an uptrend in the UK sales almost immediately following the vote. We believe that the weakening of the pound has made London a more attractive tourist shopping destination.”

Tiffany 1Q16 Earnings Call Notes

Continuation of softness in sales trends

” Overall, these first quarter results generally represented a continuation of the softness in sales trends that we experienced in the latter part of 2015 and were largely what we expected.”

Americas sales declined 9%

” in the Americas total sales declined 9% and comparable store sales declined 10%. On a constant exchange rate basis, total sales declined 8% in the first quarter and comp store sales declined 9%. We attribute the overall lower sales to softness in domestic customer spending in many U.S. markets as well as lower spending by foreign tourists of many nationalities in New York and other high tourism markets. The total sales decline was due to unit related softness across most jewelry categories.”

Moderated annual forecast

“So in terms of our outlook for the year we believe it is prudent at this point of the year to moderate our annual forecast and call for a mid single-digit decline in diluted EPS in 2016 versus last year’s diluted EPS excluding charges. We do acknowledge some of the specific risks to the guidance for the remainder of the year primarily related to the difficulty in accessing the potential for a slower than expected improvement in U.S. activity, continued substantial softness in Europe and weakness in foreign tourist spending among the Chinese and other nationalities.”

Tiffany 4Q15 Earnings Call Notes

Frederic Cumenal – CEO

Will probably have to deal with weak tourist spend in 16 again

“Talking specifically about the domestic consumer in the U.S. because we all know the very negative impact of foreign tourist that we have to deal in ’15 and frankly that we will mostly likely have to continue to deal with in ’16. ”

Domestic consumer behavior in the US has been fickle

“The domestic consumers in the U.S. behavior have been quite fickle and frankly we can put that partly on the economic uncertainty on the volatility of the financial market and on a particularly tensed electoral campaign in a year of presidential election””

Tourist business into Europe could be down significantly this year

“2015, the first part of the year we’ve enjoyed a very nice growth in Europe thanks to influx of tourists, and we believe that because of what’s going on in Europe has a combination of break sit in the U.K., migrants in continental Europe and in the U.K. and risk of terrorism or perception of risk of terrorism, we believe that the tourist business in Europe that is a main driver of sales for this region will be very significantly down.”

China is solid, but Hong Kong is a nightmare

“just on your comment on China, frankly we are quite pleased with mainland China and all performance in China. We have had very solid performances in ’15 in China, and we have no reason to think that our performance won’t be good in mainland China in ’16. Truth is that greater China because of Hong Kong continues to be a nightmare. There is no other word, and I believe this is the same for all of us, all the luxury player. We don’t know when we will bottom up and we don’t believe that the situation will significantly improve in Hong Kong during ’16”

Perception of currency weakness is as important as actual weakness

“it is not so much the value of the dollar that is the concern. The concern is the unpredictability and the reality for consumers is that perception is reality so, when you have a currency moving in one direction or the other direction consumers and tourist really tend to believe that everything is on deal in a given country or that everything is super expensive in another country.”

…”when we look internally at our price differentials in the world, we are not any cheaper in Europe than we are in the U.S. so for Chinese consumers, buying Tiffany in Europe is not really a better deal than buying Tiffany in the U.S. But they believe that everything in Europe is cheaper and there is nothing that I can do”

Someone is always going to be better than we are in luxury

“And lastly on digital, we are spending, we have been spending and we are trying to be state of the art on digital. Are we? No. Will we ever be? No, because always someone will do better than the ones after, but not in luxury actually. I will argue that we are probably more leading the pack, the group, in luxury than following all the luxury players.”

Ralph Nicoletti

Going to be hard to get expense leverage with weak sales growth this year

“when we look at the progression of our sales and particularly in the first quarter and what the comparisons also look like. We see the first half of the year more challenging than the second half, and then with that as you know on this business you need solid growth to get expense leverage, and frankly we’re going to be not seeing that. It’s going to build through the year so it’s difficult to get expense leverage and that puts some pressure on the EPS particularly in the first half of the year, and most acutely in the first quarter.””

Mark Aaron – VP, IR

Financial results were disappointing

“I think we can begin with a candid assessment that overall financial results 2015 were disappointing. ”

Negatively affected by the dollar

“For a good part of the year we achieved healthy sales growth on a constant exchange rate basis in most regions outside the U.S. But sales were negatively affected by the translation effect of strong U.S. dollar.”

Year concluded on a softer note

“he year concluded on a softer note in most markets around the world. While we can attribute some of the pressure on results of the strong U.S. dollar and other macro factors that affected consumer spending, bot with local customers and foreign tourists which we expect will continue into 2016 “

Tiffany 3Q15 Earnings Call Notes

Tiffany (TIF) Q3 2015 Results – Earnings Call Transcript

Third quarter results were generally mixed

“in general the third quarter results were mixed. Sales and margins continued to be negatively affected by the strong U.S. dollar and net earnings came in several cents lower than we expected. However, worldwide net sales increased 4% on a constant exchange rate basis despite greater than expected softness in the Americas, reflecting strong growth in Japan and modest growth in Europe and the Asia Pacific regions.”

Substantial decline in tourists in the US

“we once again saw a substantial decline in sales to foreign tourists in varying degrees by nationality with pronounced weakness in New York area as well as in other tourist related markets on the East and West coast of the U.S. and in Hawaii.”

Pleased with China despite headlines

“With China in the news so much regarding their economy stock market and currency, we are pleased and encouraged that our total sales in China increased by a healthy amount in the third quarter despite volatility and sensitivity to headline macro events.”

Foreign tourist spending up in Europe however translated to US dollars third quarter sales in Europe declined

“the euro and pounds weakness against the dollar have stimulated foreign tourist spending in Europe while perhaps also encouraging some Europeans to shop locally rather than abroad. However, when translated into U.S. dollars, total third quarter sales in Europe decreased 2% due to small variations among jewelry categories in unit volume and average price.”

Tiffany’s 2Q15 Earnings Call Notes

Results pressured by strong dollar

“from an overall perspective second quarter financial results from the top line to the bottom line continued to be significantly pressured by the strong U.S. dollar and worldwide net sales as reported were flat to last year. ”

Lower tourist spending

“higher domestic spending in the Americas largely tied to strengthen statement jewelry sales was offset by lower foreign tourists spending in the U.S. especially in New York and Hawaii, which we attribute primarily to the effect from the strong U.S. dollar.”

Impossible to quantify effect of stock market on sales

“With regard to recent news from China in the same way that it’s not possible to quantify the positive wealth effect from a rising stock market on our sales growth there in the past couple of years. It’s similarly difficult to predict any potential negative effect on sales in magnitude or duration from their recent stock market correction or currency devaluation.”

Net Earnings down 16%

“With regard to recent news from China in the same way that it’s not possible to quantify the positive wealth effect from a rising stock market on our sales growth there in the past couple of years. It’s similarly difficult to predict any potential negative effect on sales in magnitude or duration from their recent stock market correction or currency devaluation.”

Focusing on growing inventories less than sales

“our goal for this year and beyond is to also keep inventory growth below the rate of sales growth by achieving better productivity in our stores as well as in our overall supply chain.’

Tiffany 1Q15 Earnings Call Notes

Worldwide sales declined 5% which was better than expected

“Okay. Starting with the first quarter overview, while, results were admittedly far from robust, they did exceed our expectations and we were pleased with continued progress in executing our key store, product and marketing-related initiatives.

Net worldwide sales declined 5% in the first quarter, which was better than the 10% decline we had expected, due to strong performance in Europe and a smaller than anticipated year-over-year decline in Japan. On a constant exchange rate basis excluding the translation effect of the strong U.S. dollar, worldwide net sales increased 1%.”

Regional sales varied widely

“Regional total sales performance again on a constant exchange rate basis ranged from a 21% increase in Europe, benefiting from strong foreign tourist and local customers spending there to an 18% decline in Japan after a surge in spending there in last year’s first quarter.”

weak US sales growth due to tourist spend

“This minimal sales growth in the Americas reflected an increase in domestic spending, which was mostly offset by lower foreign tourist spending in the U.S., especially in New York, which we attribute to the strength of the U.S. dollar. Elsewhere in the Americas we achieved healthy sales growth in Canada and Latin America on a constant exchange rate basis.”

Weaker yen has affected tourist spending, but my have boosted domestic japanese spend

“We believe such a substantial weakening of the yen has affected spending by Japanese tourists when they travel but might be supporting some local spending in Japan.”

Fashion jewelry led by gold

” fashion jewelry was a strong performer in the quarter. The strength in fashion continued to be led by gold jewelry designs.’

Continued weakness in silver

“we continue to experience weakness in silver jewelry sales before $500. We are focused on addressing this issue over the balance of the year through product development and advertising targeted at what we call our little luxuries.”

Tiffany’s 4Q14 Earnings Call Notes

Strong dollar affecting sales to tourists

The strong U.S. dollar had a minimal negative translation effect on the Americas sales but is having an adverse effect on foreign tourists spending in the U.S. especially in New York. And this effect certainly worsened in the later part of 2014.”

Broad based softness geographically across the US

“We attribute the Americas comp decline in the fourth quarter to softness that was broad based geographically across the U.S. and in most product categories except fashion jewelry.”

Softness partially due to lack of newness but also perhaps competitive and macro pressures

“We attribute the softness in the under $500 silver jewelry category to a lack of product newness and marketing focus and perhaps also the competitive and macro pressures on the jewelry purchaser at those price points. So we do have some opportunity to fine tune our approaches to those issues within our control.”

Softening sales in Hong Kong and Macau

“Starting in the third quarter, Tiffany has seen a mark softening in sales results in Hong Kong and we’re also experiencing weakness in Macau. We believe that some tourists may be diverting their travels to other markets or perhaps increasing their spending locally.’

Tiffany 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Americas doing great. Gold jewelry especially, entry level silver still not so much

“Starting with the Americas region, total sales increased 10% in the quarter due to an overall increase in the average price per jewelry unit sold, reflecting price increases taken in the Americas and other regions as well, but also stronger demand for gold within the fashion jewelry category. It’s worth noting that there was healthy unit growth in most categories, but that was offset by continued unit declines in entry level price point silver jewelry.”

Strong macro environment for our core customers

“We attribute the healthy sales growth from the Americas to a range of factors, including more engaging selling initiatives and visual merchandizing in our stores, new products, compelling marketing, and what has been a favorable macro environment for our core customers.”

Asia pacific soft, but China still had double digit comp

“The Asia pacific region had its challenges in the quarter, starting with the difficult comparison to a 22% comp store sales increase last year, which at that time had been driven by broad based growth across the region, including some statement jewelry sales. It was a different picture in this third quarter, with double digit comp store sales growth in mainland China, offset by varying degrees of softness in other markets. We’d expected only modest comp growth in Asia Pacific in this third quarter.”

Sales growth in Japan is taking longer than expected

“I presume by now you’re all aware of the extreme volatility in consumer spending before and after an increase in Japan’s consumption tax on April 1st…The return to monthly sales growth is taking longer than anticipated and we believe softness is now being exacerbated by weakening economic conditions.”

Mainland Europe better than UK

“We saw quite a contrast in European sales results between the UK and the continent. All countries in which we operate stores in continental Europe, achieved varying degrees of comp store sales growth in local currencies tied to both local customer and foreign tourist spending. However, comps continued to decline in the UK, reflecting some softness in both customer categories.”

Tiffany’s 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Strength in high end jewelry, weakness in entry level

“We were pleased to experience healthy unit growth in the statement, fine and solitaire jewelry category as well as in our engagement jewelry and wedding band category. And we’re pleased that fashion jewelry unit sales are benefiting from strength in gold jewelry.

However, continued softness in silver jewelry unit sale in particular entry level sales under $500 was the reason why we had no growth in total jewelry units in the Americas.”

Strong tourist sales and conditions strong for our customers in NA

“we benefited from foreign tourist spending that is likely tied to growing brand awareness globally and perhaps some currency fluctuation too. And of course, conditions in the U.S. are favorable for many of our customers.”

Japanese sales recovering more slowly than expected

“Now let’s turn to Japan where sales have been volatile to say the least in the first half of this year. As I alluded to in the overview after experiencing a surge in spending in the first quarter as Japanese consumers purchased in advance of a consumption tax increase on April 1. We anticipated a significant demand to offset in the second quarter, which occurred as we expected. The good news is that following a substantial sales decline in April, we saw a decelerating rate of sales decline in each months of the second quarter. However, the return to monthly sales growth is taking longer than we expected. Department stores in Japan have reported that they have also been experiencing sequentially smaller rates of sales declines in jewelry sales in the past several months.”