Tiffany's First Quarter Sales up 12% and E.P.S. up 28%

Business Wire, May 30, 2008

NEW YORK -- Tiffany & Co. (NYSE: TIF) today reported results for the three months (first quarter) ended April 30, 2008. Sales results benefited from strong growth in Asia-Pacific and Europe. Net earnings per diluted share surpassed management's expectation due to higher-than-expected sales and operating margin.

Worldwide first quarter net sales increased 12% to $668.1 million, versus $595.7 million in the prior year. On a constant-exchange-rate basis which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars (see attached "Non-GAAP Measures" schedule), net sales and comparable store sales rose 8% and 3%, respectively.

Net earnings from continuing operations rose 20% to $64.4 million in the first quarter, versus $53.8 million in the prior year. Net earnings from continuing operations per diluted share increased 28% to $0.50, versus $0.39 a year ago.

Segment reporting changed:

Effective with this first quarter, management has changed segment reporting to reflect operating results for the following regions: the Americas, Asia-Pacific and Europe. Prior year results have been revised to reflect this change. The Company has expanded its global reach and management has determined to assess performance on a region-by-region basis, rather than on a channel-of-distribution basis.

First quarter sales by region were as follows:

* Total sales in the Americas region (consisting of sales in the U.S., Canada and Latin/South America) increased 6% to $373.6 million, versus $353.3 million in the prior year, due to incremental sales from new stores. Comparable store sales in the U.S. were equal to the prior year, consisting of a 16% increase in Tiffany's New York flagship store (due to increased foreign tourist spending) and a 4% decline in branch store sales. Combined catalog and Internet sales in the U.S. increased 1%.

* Sales in the Asia-Pacific region (which includes sales in Japan, in Asia-Pacific countries outside Japan, and in the Middle East) increased 21% to $222.0 million from $183.1 million. On a constant-exchange-rate basis, sales rose 10% and comparable store sales increased 4% reflecting strong growth in all Asia-Pacific countries other than Japan.

* Sales in Europe increased 38% to $60.1 million, versus $43.5 million. On a constant-exchange-rate basis, a 30% increase in sales was due to 12% comparable store sales growth and incremental sales from four new stores.

* The Company operated 192 TIFFANY & CO. stores and boutiques at April 30, 2008 (81 in the Americas, 93 in the Asia-Pacific region and 18 in Europe), compared with 171 (74, 83 and 14 in those respective regions) a year ago.

* Other sales declined 21% to $12.4 million, from $15.7 million a year ago, due to reduced wholesale sales of diamonds made in connection with the Company's diamond sourcing program.

Michael J. Kowalski, chairman and chief executive officer, said, "We are pleased to start the year with sales and earnings growth above our expectations. A 12% increase in worldwide sales, despite only modest growth in the U.S. due to challenging conditions, reflects the benefit of globally-diversified distribution."

Other financial highlights were:

* Gross margin (gross profit as a percentage of net sales) was 57.1% versus 56.1% in the prior year. The increase was due to sales leverage on fixed costs and a decline in wholesale sales of diamonds. As previously disclosed, effective with this first quarter the Company changed from the LIFO method to the average cost method of inventory accounting, and all prior-year results have been revised for the change.

* Selling, general and administrative ("SG&A") expenses increased 13% due to higher labor and occupancy costs (related to new and existing stores) and increased marketing expenses, as well as the translation effect of stronger foreign currencies. The ratio of SG&A expenses to net sales was 41.6% versus 41.3% in the prior year.

* The Company's effective tax rate was 36.7% compared with 36.5% a year ago.

* The Company repurchased and retired 1,382,600 shares of its Common Stock in the first quarter at a total cost of $54.8 million, or $39.66 per share. Under the current program, the Company had $566 million available at April 30th for future repurchases through January 2011.

* Net inventories of $1.47 billion were 10% higher than a year ago, partly due to increases in raw material and work-in-process inventories for internal jewelry manufacturing. In addition, almost half of the increase was due to the translation effect of stronger foreign currencies.

* Total debt as a percentage of stockholders' equity was 35% at April 30, 2008, compared with 27% a year ago.

Mr. Kowalski continued, "We are continuing to pursue important expansion opportunities in 2008 and expect to open approximately 24 stores across the U.S., Asia-Pacific and Europe. And we will introduce a new, smaller store format in the U.S. later this year. We believe Tiffany is well-positioned to gain market share in this competitively-demanding environment."