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Guess Profit Falls 7%; Outlook Weak


International fashion house Guess?, Inc. (GES) said Wednesday after the markets closed that its fourth quarter profit fell 7% from last year, hurt by slow revenue growth and lower margins.

The company's quarterly earnings per share came in line with analysts' expectations, but its quarterly revenue fell short of analysts' forecast.

At the same time, the company gave downbeat guidance for the first quarter and the current fiscal year.

Guess shares are currently losing 11.44% in after hours trading after closing the day's regular trading session at $36.70, down 2 cents. The shares trade in a 52-week range of $25.99 to $45.73.

Guess? offers collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, and knitwear.

The company's retail stores in North America generated fourth quarter revenue of $343.5 million, up 1.4% from a year ago. Same-store sales for the quarter decreased 4.6% in local currency and 5% in US dollars. At the end of the fourth quarter, the company operated 504 retail stores in the U.S. and Canada, compared to 481 stores a year earlier.

Fourth quarter revenue from the company's North American wholesale segment increased 7.5% to $70.6 million.

The company's Europe revenue for the quarter declined 1.4% from a year earlier, while its Asia revenue surged 27.5% from last year. Licensing revenue for the quarter remained flat with last year.

Gross margin for the quarter narrowed to 43.5% from 44.4% a year ago.

Operating margin for the quarter declined to 17.5% from 19.1% last year, as improved product margins were more than offset by higher occupancy and SG&A rates.

Product margins improved due to lower markdowns in North America and greater European retail mix, while the increase in the occupancy rate resulted from negative same-store sales in North America and Europe and store expansion in Europe.

Paul Marciano, Chief Executive Officer of Guess, said, "We are pleased to deliver fourth quarter earnings consistent with our expectations, even as economic pressures impacted consumer confidence in some of our markets."

For the fourth quarter ended January 28, 2012, the Los Angeles, California-based company reported net income of $95.9 million or $1.05 per share, compared to $103.3 million or $1.11 per share for the year-ago quarter.

On average, 12 analysts polled by Thomson Reuters expected the company to earn $1.05 per share for the fourth quarter.

Total net revenue for the fourth quarter rose 2.5% to $775.84 million from $756.92 million in the same quarter last year. Ten analysts had a consensus revenue estimate of $778.53 million for the fourth quarter.

During the fourth quarter, the company repurchased 3.2 million shares of its common stock for $92.0 million. As of January 28, the company had remaining approval under its existing repurchase program to purchase $158.0 million of its common stock.

The company also said that its Board of Directors has approved a quarterly cash dividend of $0.20 per share, payable on April 13 to shareholders of record at the close of business on March 28.

Looking forward to the first quarter, The company forecast total net revenues of $560 million to $575 million and earnings of $0.25 to $0.28 per share. Analysts currently expect the company to earn $0.48 per share on revenue of $609.66 million for the first quarter.

For the fiscal year ending February 2, 2013, the company forecast total net revenues of $2.74 billion to $2.78 billion and earnings of $2.50 to $2.65 per share, including $0.35 to $0.40 per share for increased marketing investment and unfavorable currency impact. Analysts currently expect the company to earn $3.18 per share on revenue of $2.83 billion for the fiscal year 2013.

"We enter this fiscal year in a challenging macroeconomic environment, especially in Europe, though there are some signs of improvement in the United States," said Marciano.

by RTTNews Staff Writer

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