Tiffany & Co. Conference Call Highlights

reported its third quarter earnings on Tuesday. Shares of the company are up 2 percent. Below are some key highlights from its conference call.

• Tiffany's worldwide sales rose 5% in the quarter, with mixed performance by region due to a variety of factors. • There was a 2% negative translation effect from the strengthening U.S. dollar, and sales on a constant exchange rate basis rose 7%. • By product category, we saw the greatest strength in fashion jewelry sales. • The operating margin was up from last year, resulting from a gross margin increase that more than offset higher SG&A growth, and that SG&A increase included the stepped-up marketing spending. • During the quarter, we completed a long-term bond issuance to prepay high rate existing debt, which reduces future interest expense and extends long-term debt maturities. • We recorded a $94 million one-time charge for the debt extinguishment. • Adding it all up, Tiffany's third quarter net earnings increased 5% excluding the charge, but declined 60% with the charge. • 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. • On a constant exchange rate basis, total sales rose 11% in the quarter, and comparable store sales also increased 11%, following an 8% comp increase in the first half of this year. • Compared with a 1% comp increase in the third quarter of last year. • We experienced healthy rates of sales growth in most markets of the U.S. • Sales growth in the New York flagship store benefited from increased local demand, while foreign tourist spending was about equal to last year. • In terms of new stores, earlier this month we opened a 2,000 square-foot store on Boston's fashionable Newbury Street and expect to soon open a 5,000 square-foot store in the exciting Miami Design District. • And elsewhere in the Americas region, we were pleased to see solid double-digit local currency sales growth in Canada, Mexico, and Brazil in the quarter. • 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.

• Gross margin was 59.5% in the third quarter, up from 57% last year due to favorable product input costs and price increases taken across all product categories and regions, as well as strong sales growth in fashion jewelry. • Selling, general and administrative expenses rose 10% in the third quarter, notably reflecting the substantial increase in marketing spending that we planned and had highlighted on our call three months ago. • Operating earnings increased 10% on the 5% sales growth, and the operating margin increased 70 basis points in the quarter, as the higher gross margin more than offset the higher SG&A spending. • Turning to the balance sheet, we finished the quarter in a strong position with substantial liquidity. • Net inventories at October 31 were up 6% versus year ago to support new stores and product introductions. • During the quarter, we repurchased approximately 63,000 shares at an average cost of $92 a share. • This leaves $278 million available for future repurchases under our $300 million three-year program that expires in March of 2017. • We began 2014 projecting net earnings in the range of $4.05 to $4.15 per share, or 9% to 11% higher than the adjusted $3.73 per share that was earned in 2013. • We have raised the range twice after reporting first and second quarter results, and today, based on these third quarter results. • We are affirming our most recent forecast at $4.20 to $4.30 per share excluding the debt extinguishment charge, representing estimated full-year EPS growth of 13% to 15%.