Iconic jewellery Tiffany’s has posted an 8 percent profit rise on sales up 6 percent in the first quarter. Despite higher gross margins, the jeweller warned that rising precious metal prices could affect margins next fiscal year. Net income for the quarter ended 30 April rose to $43.1 million from $40.1 million on sales of $539.2 million from $509.9 million last year. Operating profits rose 12 percent to $74.2 million.
The company said international sales gained 13 percent, while Japan gained 4 percent and other countries in the Asia-Pacific region saw a rise of 19 percent. European sales were up 18 percent, while the US saw a small rise of 2 percent. Chairman and chief executive Michael J. Kowalski said in a statement that he was “very pleased with the geographically broad-based strength in our international stores and (we) are encouraged with Tiffany’s results in Japan . US retail sales results were disappointing, but it should be viewed (as) relative to a strong 14 percent increase in last year’s first quarter.”
The gross margin rate leapt to 55.8 percent as opposed to 53.9 percent last year. “The increased margin primarily reflected favourable product sales mix, as well as some benefit from geographical sales mix,” the company said in a statement. It warned, however, that higher precious metal and diamond costs to exert pressure on margins, “although the company periodically adjusts retail prices to mitigate such effects.”
Speaking about softer US sales, Mark L. Aaron, vice president of investor relations, said that “lower sales to European travellers accounted for the majority of the sales decline in the New York flagship store and lower sales to Japanese travellers resulted in a sales decline in Hawaii .” Sales in Japan exceeded expectations with comparable store sales up 12 percent.
Kowalski said that Tiffany’s is “expanding our presence this year with five new US stores and new locations in Japan , China , Austria , Mexico and Canada . We are also maintaining an active pace of new product introductions, highlighted by the recent launch of jewellery designed by the renowned architect Frank Gehry.” Management expects sales to grow 10 percent this year. “Our forecast assumes gradually improving trends in the US and solid international sales growth so that we achieve mid-single-digit comparable store sales growth in the US and Japan for the full year.”
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