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Guess Profit Jumps 81%, Tops Estimate

Guess Profit Jumps 81%, Tops Estimate
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3/17/2010 5:23 PM ET

International fashion house Guess? Inc. (GES: Quote) said Wednesday its profit for the fourth quarter jumped 80.7% over last year, driven by higher sales and improved margins. Quarterly adjusted earnings grew 45.5%, and topped the analysts' expectations. Looking ahead, the company provided revenue outlook for the first quarter and fiscal year 2011, above the current Street consensus. Further, the company's board also approved an increase to its quarterly cash dividend by 28%.

The Los Angeles, California-based company reported net earnings of $86.6 million or $0.93 per share for the fourth quarter, up from $47.9 million or $0.51 per share in the prior year quarter.

Result for the quarter included a $4.3 million non-cash asset impairment charge, compared to $22.3 million last year, related to long-lived assets associated with retail stores, primarily in North America.

Excluding the impairment charges, adjusted net earnings soared 44% to $89.3 million from $62.0 million in the year-ago quarter. Adjusted earnings per share grew 45.5% to $0.96 from $0.66 a year earlier. On average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.81 per share for the fourth quarter. Analysts' estimates typically exclude special items.

Operating earnings for the fourth quarter jumped 76.3% to $120.7 million from $68.5 million in the corresponding quarter of the prior year. Operating margin increased 660 basis points to 18.8%, driven by stronger product margins in all segments and lower asset impairment charges.

Excluding the non-cash impairment charges, adjusted operating earnings increased 37.7% to $125.0 million from $90.7 million in the fourth quarter of last year. Adjusted operating margin improved 330 basis points to 19.5% from 16.2% in the prior year quarter.

Fourth quarter total net revenue increased 14.4% to $642.0 million from $561.1 million in the same quarter last year. Ten analysts had a consensus revenue estimate of $601.67 million for the fourth quarter.

Comparable store sales for the fourth quarter increased 5.3%, or 2.0% in constant dollars over a year ago.

Revenue from the company's retail stores in North America rose 7.2% to $309.4 million. Comparable store sales improved 5.3%, or 2.0% in constant dollars.

Guess operated 432 retail stores in the United States and Canada at the end of the fourth quarter of fiscal 2010, compared to 425 stores a year earlier.

Revenue from the wholesale segment, which includes its Asian operations, grew 21.1% to $84.7 million. European segment generated revenue of $222.6 million during the quarter, an increase of 23.7% over last year. Licensing segment's revenue increased 12.3% to $25.4 million for the fourth quarter of fiscal year 2010.

The tax rate for the fourth quarter was 29.9%, compared to 22.9% in the year-ago quarter, due to finalization of the annual effective tax rates in both years.

Further, Guess said that its board has approved the increase of quarterly cash dividend by 28% to $0.16 per share over its most recent quarterly dividend. The dividend will be payable on April 16 to shareholders of record at the close of business on March 31.

For fiscal year 2010, Guess reported net earnings of $242.8 million or $2.61 per share, up from $213.6 million or $2.25 per share in the previous year.

Excluding asset impairment charges, adjusted net earnings grew to $245.7 million or $2.64 per share from $229.0 million or $2.41 per share in the prior year.

Annual net revenue increased 1.7% to $2.13 billion from $2.09 billion in the year-ago. Comparable store sales decreased by 4.5% for fiscal 2010.

For the first quarter, Guess anticipates earnings of $0.46 to $0.48 per share, and net revenues of $495 million to $510 million. The Street currently expects earnings of $0.47 per share on revenue of $484.16 million for the first quarter.

For fiscal year 2011, the company expects earnings of $2.87 to $2.95 per share, and net revenues of $2.30 billion to $2.35 billion. Analysts estimate earnings of $2.92 per share on revenue of $2.29 billion for the year.

Among others in the industry, specialty retailer Gap Inc. (GPS: Quote) said its profit for the fourth quarter increased 45% over last year, helped by higher sales at Old Navy stores and international sales. Looking ahead, the San Francisco, California-based company provided earnings outlook for fiscal year 2010, which is expected to beat Street consensus.

Another peer, apparel maker Polo Ralph Lauren Corp. (RL: Quote) reported a rise in third quarter net profit, helped by improved gross margins and higher comparable store sales, despite a slight decline in net revenues. Looking ahead, the New York-based fashion company said it remains cautious regarding global consumer spending trends, while providing its guidance for the fourth quarter and full year 2010.

Guess closed Wednesday's regular trading at $46.68, up 7 cents, on a volume of 2.88 million shares. In after-hours, the share further gained 37 cents. The stock has been moving in a range of $15.02 - $47.39 for the past 52 weeks, with a three-month average volume of 0.81 million shares.

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by RTT Staff Writer

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