In addition to the classics, the management believes that the customers are responding enthusiastically to newer designs like the Legacy, Swing and Nova collections; and Tiffany Celebration rings continue to grow in popularity.

At other price points, the company is also pleased with growth in silver jewelry which includes Tiffany’s popular new silver charms. Product development will continue at the active pace established over the past few years with an array of new designs ranging from diamond jewelry to silver jewelry.

The venture with Luxottica announced last year to introduce Tiffany’s first Eye Wear collection is on track for an exciting launch in 2008.

The management is enthusiastic about the company’s strategy to substantially expand wholesale distribution of Tiffany Watches in 2008. Tiffany’s is working to finalize plans for that major initiative and hope to be able to provide greater detail in the coming months.

The Sale of Little Switzerland

The company had acquired Little Switzerland almost 5 years ago, but more recently determined that it was simply not a good fit with the business. The sale will result in an improved operating margin going forward which the company factored into the earnings expectations.

The company has made progress in capital utilization by entering into a sale leaseback of Tokyo flagship store.

Tiffany’s had acquired that land and building in 2003 in order to secure Tiffany’s presence on that prime location, and since then have been formulating plans for a renovation and eventual sale of the property. The company is currently finalizing plans for an extensive renovation of that store and hopes to share those plans in the near future.

Two potential uses of the cash the company is generating are dividend increases and share re-purchases.

- Two weeks ago Tiffany’s announced its second dividend increase for the year. The company had increased the dividend by 20% just three months ago and followed it with this latest 25% increase.
- In its share re-purchase program Tiffany’s has a substantial amount of re-purchase capacity under the current authorization.

Fiscal 2007 Outlook

- Thå company is now expecting approximately 14% total sales growth for the full year, including same-store sales increasing by a low double-digit percentage in the US and high single-digit percentage internationally.
- With international, for the second half alone, the company expects mid to high-teens same-store sales growth in Europe and Asia-Pacific, and Japan comps up slightly.
- In direct marketing the company expects a mid-teens increase for the year, with optimism tied to the upcoming and exciting re-launch of Tiffany’s website.

Other sales are expected to be up approximately 40% for the year, with most of that due to increased wholesale sales of diamonds.

For the full year, the company expects gross margin to be down a few-tenths of a point due to the decline in the first half, but expects that continued low double digit growth in SG&A expenses will result in good expense leverage.

Other expenses net are expected to be closer to $10 million for the year, versus the company’s initial expectation for twice that level, as cash proceeds from asset sales result in higher interest income and lower interest expense. Tiffany’s now expects an effective tax rate from continuing operations of approximately 37% for the full year.

The company is looking for full year net earnings of $2.44 to $2.49 per diluted share.

Excluding the charge for Little Switzerland, and its losses from operations, the gain from the sale of the Tokyo flagship and a related contribution to the Tiffany & Company Foundation, that would equate to $2.22 to $2.27 per diluted share which is higher than our previous expectation of $2.10 to $2.15 per diluted share that the company issued three months ago, mostly due to the strong second quarter performance.

There is no question and answer session associated with the second quarter fiscal 2007 earnings call conducted by Tiffany Co. (TIF: chart) on August 30, 2007.