Tiffany & Co Seeks to Establish Rough Diamond Marketing Subsidiary

Tiffany & Co. said last week it is planning to establish a fully owned Antwerp-based subsidiary to provide rough diamond marketing services to rough producers. Basically, Tiffany wants to conduct auctions.

The yet-to-be-established subsidiary has entered into an agreement with a Washington, D.C.-based company called Power Auctions, a leading provider of auction design and implementation services, to jointly create and implement market solutions for rough diamond producers, Tiffany said in a statement.

“Power Auctions' software has been used to run the majority of high-stakes clock auctions held worldwide to date. Its proprietary Intra-Round Bidding technology allows for a significant reduction in the number of rounds in an auction while improving efficiency and revenues,” it said.

Services to be offered by Tiffany's will include rough sorting, sourcing and qualification of buyers, presentation of goods, design and administration of auctions, collection of payment from buyers and delivery of goods to successful buyers.

The new subsidiary will operate on an agency basis acting on behalf of its principal clients, the rough producers.

The Tiffany rough business will be headquartered in Antwerp, but it plans to open branches in other diamond trading centers across the globe as required, Tiffany said.

-PolishedPrices

Tiffany's 3Q Sales +21%, Earnings +63% to $90M

Tiffany & Co. reported third quarter sales rose 20.5 percent year on year to $821.8 million for the three months that ended on October 31. Same-store sales rose 16 percent globally on a constant exchange rate basis. Cost of sales rose by 22 percent to $345.9 million, allowing gross profit to increase 19 percent. Gross margin fell to 57.9 percent from 58.5 percent one year ago. Net earnings, though, jumped 62.8 percent to $89.7 million or 70-cents per diluted share.

Tiffany lowered its long-term debt by 9 percent to $539.7 million and increased net inventory to $2.1 billion from nearly $1.7 billion one year ago. Cash and equivalents, however, fell 44 percent to $297.4 million.

Net sales in the Americas rose 17 percent year on year while comparable store sales rose 15 percent. On a constant exchange rate basis, sales rose 40 percent in the Asia Pacific region with same-store sales increasing by 36 percent, while Japan had an overall sales increase of 3 percent and same-store sales increase of 4 percent. Tiffany's European division recorded a sales increase of 15 percent in local currency and a same-store sales improvement of 6 percent year on year.

Michael J. Kowalski, the chairman of Tiffany & Co., said, ''Increased sales in all regions contributed to the continuation of strong worldwide sales growth in the third quarter. We were also pleased to achieve an improved operating margin by leveraging the sales growth against fixed costs. Tiffany is extremely well-positioned to serve growing numbers of discerning customers around the world with extraordinary product offerings and superior shopping experiences.

''We are, of course, mindful of continued short-term economic challenges and uncertainties in some markets. Worldwide sales-to-date at this relatively early stage of our November-December holiday season are tracking in-line with our current expectations despite recent sales weaknesses in Europe and in the eastern part of the U.S.,'' he said.

Looking ahead to Tiffany's fourth quarter, the company expects a low-teens percentage increase for worldwide sales and an operating margin increasing more than one point. Tiffany anticipates net earnings to jump almost 30 percent or within a range of $1.48 to $1.58 per diluted share, up from $1.44 per diluted share in 2010.

In a client note yesterday, Margaret Whitfield of Sterne Agee estimated Tiffany's comparable-store sales would increase nearly 15 percent and a 20 basis point improvement in gross margin to 58.7 percent. ''Tiffany has met little resistance raising prices to offset higher raw material costs so far, which we expect to continue,'' Whitfield wrote. ''We maintain our 'Buy' rating with a target price of $90, based on 19.1x our fiscal year 2013 EPS estimate. We expect Tiffany will benefit from healthy global demand from high-end consumers.''

-Rapaport

Tiffany Publishes Corporate Responsibility Report

Tiffany & Co. published its corporate responsibility report, online, www.tiffany.com/sustainability, detailing its accomplishments as well as continuing challenges this past year and its agenda for social change moving forward. The report provides insight into Tiffany’s corporate standards and operations regarding the sourcing of precious materials.

Website visitors learn that gold, silver and platinum used in Tiffany’s workshops are sourced from responsibly mined metal deposits and recycled sources in the U.S. to minimize environmental and social risks. In addition, Tiffany works with non-governmental organizations as well as the mining and jewelry industries to improve mining standards, and is working to protect areas such as Bristol Bay, Alaska.

''Our position as a leader in the luxury jewelry market gives us the opportunity and the responsibility to set an example for the industry and to conduct our business in a manner that is consistent with our core beliefs—protection of the environment, respect for human rights and support for the communities in which we do business,'' said Tiffany & Co.'s chairman, Michael J. Kowalski.

Tiffany lays-out the specifics of its diamond supply chain in the report and describes how the company works to purchase diamonds -- either directly from a mine or a supplier that only sources from known mines. ''Believing that diamonds should benefit the economies and societies of diamond-producing countries, Tiffany has invested in manufacturing operations, as well as employee development and training programs at Tiffany & Co. cutting and polishing facilities in Belgium, Botswana, Mauritius, Namibia, South Africa and Vietnam,'' the company explained.

Tiffany supports the communities where it operates through The Tiffany & Co. Foundation and corporate giving programs. In 2010, Tiffany donated close to 2 percent of pre-tax earnings to charitable purposes. Tiffany’s conservation efforts extend to its packaging as well. The online report states that Tiffany's blue bags and boxes are manufactured with materials certified by the Forest Stewardship Council (FSC), an independent, non-governmental organization established to promote the responsible management of the world’s forests. Catalogues are also produced using 99 percent FSC-certified materials.

In addition, this past year Tiffany & Co. joined the United Nations Global Compact, a strategic policy initiative for businesses that are committed to aligning their operations and strategies in the areas of human rights, labor, environment and anti-corruption and uses the report to communicate on its progress. Future reports will show progress and year over year performance comparisons.

-Rapaport

TIFFANY & CO CREATING DIAMOND JEWELRY FOR “GREAT GATSBY” FILM

Tiffany & Co has announced plans to partner with the Warner Bros. Pictures and Bazmark film production companies to create the diamond jewelry for a new version of The Great Gatsby, based on the 1925 novel by F. Scott Fitzgerald.

The latest film version of Gatsby is being directed by Baz Luhrmann and stars Leonardo DiCaprio in the title role, along with Carey Mulligan and Tobey Maguire.

Tiffany’s jewelers are working with costume and production designer Catherine Martin on pieces that evoke the spirit of the 20s. The collection includes diamonds and pearls set in platinum.

Jon King, executive vice president of Tiffany & Co, explained that the company’s archives served as inspiration, but that the jewelry in the film was custom designed rather than recreated.

-The Israeli Diamond Industry