Tiffany & Co. TIF
Q1 2010 Earnings Call Transcript

Operator: Good day, everyone, and welcome to this Tiffany & Co. First Quarter Conference Call. Today's call is being recorded.

With us today are Mark Aaron, Vice President of Investor Relations and Mr. James Fernandez, Chief Financial Officer and Executive Vice President.

At this time, I would like to turn the call over to Mr. Aaron. Please go ahead, sir.

Mark L. Aaron - VP - IR: Good morning and thanks to everyone for joining us. On today’s call, Jim and I will review Tiffany’s first quarter results and comment on the outlook for the rest of the year.

Before continuing, please note Tiffany’s Safe Harbor language that statements made on this call that are not historical facts are forward-looking statements. Actual results might differ materially from the expectations projected in those forward-looking statements. Additional information concerning risk factors that could cause actual results to differ materially is set forth in Tiffany's 2009 Annual Report on Form 10-K and on other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Now we can proceed. We’re pleased to say that the improved sales and earnings performance we observed in the latter part of 2009 has continued into 2010 and in the first quarter has surpassed our expectations. We’re also pleased that the growth was generally broad-based geographically and by price points, although we attribute much of the strong improvement to comparisons to the troughs of a year ago.

Before reviewing sales by region, you should note in today’s new release that we are now expanding our disclosure by geographical segment to align external reporting with changes in our organizational structure and greater decision making and accountability at the regional level. One revision is to report Japan separately from Asia-Pacific. Also results for certain emerging markets, such as Russia and the Middle East where we sell to distributors for their resale in those markets have moved out of Asia-Pacific and Europe and into the other segment.

We’ve posted prior year sales on our website under the heading financial information and reportable segments. Prior-year operating earnings by segment will be reported on our 10-Q reports as we move through the year. Having noted that, Tiffany’s world-wide sales rose 22% in the first quarter after declining 22% in last year’s first quarter.

Let’s now look at sales by segment. Sales in the Americas increased 22% in the first quarter, which was better than we expected and compared with the 31% decline last year. The 22% increase was generated by increased transactions in all major product categories and an increase in the average transaction size. Traffic and conversion rose too.

In terms of price stratification, we continue to see growth in sales and transactions across the range of price strata, from silver jewelry to diamond jewelry with the largest percentage increases in jewelry above $50,000. Of course high-end statement jewelry was the most depressed category a year ago.