The company has completed a major renovation of its London store in 2006, by combining two adjacent buildings, which has contributed to the excellent sales results there.

- Tiffany also recently announced that its Tokyo Ginza flagship store will undergo a major renovation in 2008 to dramatically enhance its presence at that important location.
- The company also completed the sale of Little Switzerland during the third quarter.

Last month the company announced the launch of a new generation of smaller US stores under the working name Tiffany Collections.

Those stores will be approximately 2,000 square foot each, will carry a wide range of Tiffany jewelry designs, except engagement and very high end statement jewelry and will enable the company to further penetrate a number of existing markets as well as to enter smaller but attractive markets.

The addition of this new format should ultimately increase the number of Tiffany stores in the US from the company’s previous objective calling for at least 100 stores to a new objective for as many as 170 stores.

Luxottica is getting ready to introduce the Tiffany Eyewear Collection with a pre launch to select retailers in December and wider distribution of the complete collection starting in January.

Tiffany’s balance sheet strengthened further in the quarter as the result of the Tokyo, London and Little Switzerland sales.

- Cash in short term investments of $391 million of October 31st were seven times higher than a year ago.
- Total short term and long term debt of $463 million was 30% lower than a year ago and total debt to stockholders equity was 24% at October 31st versus 39% a year ago.

During the third quarter Tiffany spent $97 million to repurchase almost 1.9 million shares of common stock at an average cost of $51.28 per share.

At the end of the quarter the company still had $539 million available under the current authorization and will be opportunistic in its purchases. In fact, the company has done exactly that, November to date, by spending $208 million to repurchase 4.4 million shares at an average cost of $46.89. That leaves Tiffany with $331 million available for future repurchases in the current program.

During the quarter the company announced a 25% increase in the quarterly dividend rate, which followed a 20% increase that the Board approved earlier in the year.

Net inventories at October 31st were 8% above the prior year due to new store openings, expanded product assortments, higher precious metal costs and expanded diamond manufacturing and sourcing operations. The company’s inventory position is in good shape as Tiffany moves into this most significant part of the holiday season.

In accounts receivable on October 31st the company is 14% higher than a year ago, largely reflecting strong sales growth but continuing to turn it 18 times per year.

- Tiffany’s return on average assets improved to 11% which achieves the company’s long term objective for at least a 10% return.
- Similarly, the return on average stockholders equity improved to 18% which meets th company’s objective for at least a 15% ROE.

For the full year Tiffany is projecting sales growth of approximately 15%.

This includes comparable store sales increasing 9%-10% in the US and in the high single digits internationally on a constant exchange rate basis. For the fourth quarter, that implies a mid single digit comp increase in the US, strong comp growth in the European and Asia/Pacific regions and a modest increase in total Japan sales.

The company is looking for direct marketing sales to improve in the fourth quarter as it increased the frequency of email messages to customers and generated 10% increase for the year. Other sales are expected to be up 50% for the year.

Sales trends in November are on track with the company’s overall expectations for the quarter.

The macro uncertainties about consumer spending are well known but Tiffany’s stores are well positioned.

Gross margin is expected to be down a few tenths of a point for the year, which implies a modest increase in the fourth quarter.

However, the company expects SG&A expense growth of approximately 13% for the year which would result in good expense leverage and an improved operating margin.