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Guess? Profit Drops, Details Weak Outlook; Stock Down

Guess? Profit Drops, Details Weak Outlook; Stock Down
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3/20/2013 5:15 PM ET

Guess? Inc. (GES: Quote) Wednesday reported a lower fourth-quarter profit, as the fashion apparel retailer incurred higher cost of sales, as well as expenses towards retail expansion in Europe, with increased markdowns.

Sales for the quarter increased 5 percent and topped Wall Street estimates, on modest growth in its main markets of North America and Europe, while Asia fared impressively.

Guess? provided a weak outlook for the first quarter as well as for fiscal year 2014, citing persistent macroeconomic weakness.

Shares of the company tanked more than 4.5 percent in after-hours trade on the New York Stock Exchange.

Guess Inc.'s weak guidance follows the downbeat outlook provided last month by fashion retailer Abercrombie & Fitch Co. (ANF) and bigger rival Gap Inc. (GAP). Lackluster market conditions in Europe and elsewhere, as well as concerns of increased pay-roll taxes and other factors at home are giving retailers some tough time.

"Despite a difficult environment, we were able to deliver fourth quarter financial results that were at the high end of our expectations. We continued to direct our expansion efforts towards newer international markets...," said CEO Paul Marciano.

Marciano added, "We enter this fiscal year with the expectation that the challenging macroeconomic environment will continue."

Guess? offers an array of denim and cotton clothing, including jeans, overalls, skirts, dresses, blouses, shirts, jackets, and knitwear.

At the company's retail stores in North America, quarterly sales edged up 2 percent from last year. On a same-store basis, sales slid 6.3 percent. At the end of the quarter, the company directly operated 512 retail stores in the U.S. and Canada, compared to 504 stores a year ago.

Quarterly sales from wholesale operations in North America rose 25.7 percent from the prior year. Sales in Europe grew 3 percent from last year, and Asia increased 19 percent.

Nonetheless, results were hurt by gross margin that contracted to 40.8 percent from 43.2 percent a year ago. Operating margin slipped 280 basis points to 15 percent.

The Los Angeles, California-based company reported quarterly net income of $72.6 million or $0.85 per share, compared to $96 million or $1.05 per share last year.

Results for the reporting quarter included a charge of $12.8 million related to the resolution of a tax audit dispute in Italy, partly offset by other tax benefits of $4 million.

Excluding items, adjusted earnings for the quarter were $81.4 million or $0.95 per share.

On average, 12 analysts polled by Thomson Reuters expected earnings of $0.87 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter rose to $815 million from $775.8 million in the prior year. Analysts on consensus estimated revenues of $785.29 million for the quarter.

For the first quarter, the company has forecast earnings of $0.05 to $0.10 per share on sales of $545 million to $560 million. Analysts currently expect earnings of $0.29 per share on sales of $590.79 million for the quarter.

For fiscal year ending February 1, 2014, the company expect earnings in the range of $1.70 to $1.90 per share on sales of $2.60 billion to $2.64 billion. Analysts currently expect earnings of $2.31 per share on sales of $2.74 billion for the year.

The company has declared a quarterly cash dividend of $0.20 per common share, payable April 19 to shareholders as of April 3.

GES closed Wednesday's regular trade at $26.95, up 0.75%, on a volume of about 2 million shares. In after hours, the stock dropped $1.25 or 4.64%.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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