The decline largely reflected the obsolescence charge for watches. Excluding the charge, gross margin in the quarter was higher than the prior year due to favorable sales mix. As a result of increased product costs, the company recorded LIFO inventory charges of $9,949,000 in the quarter and $28,650,000 in the year, versus charges of $12,966,000 and $32,877,000 in the prior year.

SG&A expenses increased 28% in the fourth quarter and 19% in the year.

SG&A expenses in the year included the impairment charges related to IRIDESSE and Tahera as well as the company''s contribution to The Tiffany & Co. Foundation. Excluding those items, SG&A expenses would have increased 8% in the quarter and 12% in the year, reflecting higher labor and occupancy costs largely tied to new and existing stores and marketing expenses.

Other expenses, net declined in both the fourth quarter and year due to reduced interest expense and/or increased interest income.

Other expenses, net in the prior year included income and gains totaling $6,774,000 associated with the sale of equity investments and marketable securities.

- The Company''s effective tax rate on earnings from continuing operations was 37.2% in the fourth quarter and 36.6% in the year, compared with 35.3% and 36.1% in the prior year.

Net inventories at January 31, 2008 were 8% higher than the prior year.

This was due to new store openings, expanded product assortments, higher precious metal costs and expanded diamond manufacturing and sourcing operations. Approximately half of the inventory increase was due to the effect of translating foreign-currency-denominated inventories at international store locations into U.S. dollars.

The company repurchased and retired 9,299,491 shares of its Common Stock in the fourth quarter at an average cost of $44.99 per share.

In the year, the company spent $574,608,000 to repurchase 12,374,000 shares of its Common Stock at an average cost of $46.44 per share. In January 2008, the Board of Directors increased by $500 million the amount authorized for future repurchases through January 2011. At January 31, 2008, the company had $621 million available for future repurchases.

The Company''s cash and short-term investments increased to $246,654,000 at January 31, 2008, versus $190,508,000 at the prior year-end.

Total short-term and long-term debt declined to $453,137,000 at January 31, 2008 from $518,462,000 in the prior year. The year-over year changes largely reflected proceeds from the company''s sale of its Tokyo and London flagship store properties and the sale of Little Switzerland, offset by funds expended for stock repurchases. The company completed the sale-leaseback of the single-tenant building housing its flagship store in London in the third quarter for proceeds of $148,628,000. As a result, total debt as a percentage of stockholders'' equity declined to 28% at January 31, 2008 from 29% at the prior year-end.

Tiffany''s productivity and profitability was improved in 2007.

Return on average assets for the year increased to 11% versus its objective that calls for at least a 10% ROA and return on average stockholders equity rose to 18%, which exceeded its objective that calls for at least a 15% ROE.

The company will discontinue utilizing the LIFO accounting method and begin using the average cost method for all inventories beginning in the first quarter of 2008.

This will result in inventory reporting conforming to the manner in which the firm operationally manages inventories and evaluates retail pricing. It also will be consistent with many of its peer companies. The management believes that the tax related cash outflow of approximately $60 million to be paid over four years is not significant given the strength of the company’s balance sheet.

The management is very enthusiastic about its strategic alliance with The Swatch Group, the world’s leading designer, developer, distributor and manufacturer of high-end luxury watches.

While 2008 is a start-up and transition year, Swatch will begin to manufacture Tiffany watches to expand wholesale distribution to independent watch retailers and to develop the marketing support that is needed to build customer awareness. The company is also working on new watch designs that will debut in 2009. The firm believes that this alliance can ultimately lead to a watch business of very substantial scale in sales and in earnings.

Tiffany will open a Patek Philippe Salon on the mezzanine level of its New York flagship store.

Tiffany''s relationship with Patek Philippe dates back more than 150 years. The firm is honored to be chosen for their only salon in the United States.