Tiffany & Co. Q4 Earnings Highlights

reported its fourth quarter earnings on Friday, March 21, 2014. Shares of the company are down 0.48 percent or $0.44 per share to $90.73. Below are some key takeaways from its conference call:

• As an overview, worldwide net sales rose 5% in the fourth quarter or 9% on a constant exchange rate basis, which was a bit better than the respective 4% and 8% increases we had reported for the holiday period. • Gross margin rose 1.4 points in the quarter. • As previously disclosed, net earnings were impacted by the adverse arbitration ruling that you're all familiar with, resulting in a net loss of $104 million in the quarter. • Finally, we're pleased that the 6% increase in full-year net sales met the expectation that we set a year ago while net earnings growth, excluding charges of 15% in the year, surpassed our initial expectations. • Let's now look at sales performance where we posted growth in all regions on a constant exchange rate basis. • First, in terms of geographical mix by region, the Americas represented 48% of worldwide net sales in 2013, which was unchanged from 2012. • Asia-Pacific was 23% of sales, up from 21% in 2012. Japan was 14% of sales versus 17% in 2012, but the decline was currency related; and Europe was 12% of sales, up from 11% in 2012. • A decline in jewelry unit volume was limited to the fashion jewelry category, which occurred mostly at price points under $500. For the full year, sales in the Americas rose 5% due to price and volume dynamics that were similar to the quarter. • On a constant exchange rate basis, comparable store sales rose 7% in the fourth quarter due to geographically broad-based sales growth across most markets, and comps were up 3% for the year with sales growth in the New York flagship store outpacing modest growth in brand stores. • We're not ready to call the 7% comp increase in the quarter the beginning of a trend, but are encouraged nonetheless • We believe that foreign tourist spending will continue to be a meaningful portion of sales in the Americas, as we generate greater brand awareness in Asia, Europe James Fernandez: • Notwithstanding some obvious economic and consumer uncertainties as well as an unfavorable arbitration ruling, 2013 was indeed an excellent year for Tiffany with sales and earnings, excluding the arbitration-related charge, reaching record levels. • Looking at the rest of the earnings statement, gross margin increased 1.4 points to 60.5% in the fourth quarter and rose 1.1 points to 58.1% in the year. • Tiffany's board approved a new program and authorized the repurchase of up to $300 million of stock over the next three years • However, I will add that those higher price point sales provide substantial incremental gross profit that can be leveraged against fixed costs and ultimately improve our operating margin. • Selling, general and administrative expenses rose 7% in the fourth quarter, reflecting higher fixed and variable labor costs such as sales commissions and incentive compensation and higher store-related costs. • Opening five stores in Asia-Pacific including three in China, one in Australia in Adelaide and our first in Thailand and closing one store in Taiwan, opening two stores in Japan and closing one existing store, opening a major store in Europe on the famous Champs-lyses in Paris and in the emerging markets opening Tiffany's first company operated store in Russia in Moscow and closing a small store in Dubai. • Inventories of $2.3 billion at year-end were up 4% from a year ago. In comparison, net inventories had increased 8% in 2012, so we met our objective for a deceleration in the rate of inventory growth. • Accounts receivable of $189 million at year-end were up 9% in the year reflecting worldwide-sales growth. The increase would have been 14% excluding foreign currency translation. • As a result strong earnings growth and favorable working capital management, offset by the one-time arbitration payment we finished the year with $367 million of cash and cash equivalents and short-term investments versus $506 million a year ago. • In summary, Tiffany enjoyed a solid year of sales and earnings growth and we believe the company is well positioned for continued success throughout 2014. We hope that you share our excitement about Tiffany's many growth opportunities. • On a final note I presume you saw the announcement two days ago that Tiffany has hired Mr. Ralph Nicoletti as an Executive Vice President and to serve as the company's next Chief Financial Officer. Ralph brings solid experience to Tiffany and a valuable global perspective and I'm sure that Mark will be introducing Ralph to many of you.