Tiffany 4Q15 Earnings Call Notes

posted in: Notes | 0

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 “