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Guess Profit Falls 45%; Declares Special Dividend

Guess 112812

International fashion house Guess?, Inc. (GES) said Wednesday after the markets closed that its third quarter profit fell 45% from last year, hurt by lower revenue and weaker margins.

The company's quarterly earnings per share also came in below analysts' expectations. At the same time, the company gave a downbeat earnings forecast for the fourth quarter and once again cut its full year earnings outlook.

Paul Marciano, Guess? Chief Executive Officer, said, "Third quarter earnings were consistent with our guidance but fell short of our operational goals, as economic pressures impacted consumer confidence in most of our markets."

The company also said that its Board of Directors has approved a quarterly cash dividend of $0.20 per share. The board has also approved a special cash dividend of $1.20 per share to be paid with the regular quarterly dividend. The combined dividends will be payable on December 28 to shareholders of record on December 12.

Guess shares are currently gaining 5.15% in after hours trading after closing the day's regular trading session at $25.25, up $1.29 or 5.38%. The shares trade in a 52-week range of $22.48 to $37.15.

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 third quarter revenue of $262.1 million, down 1.3% from a year ago. Same-store sales for the quarter fell 6%. At the end of the third quarter, the company directly operated 513 retail stores in the U.S. and Canada, compared to 495 stores a year earlier.

Third quarter revenue from the company's North American wholesale segment increased 1% to $57.9 million.

The company's Europe revenue for the quarter fell 8.3% from a year earlier, while its Asia revenue surged 15.5% from last year. Licensing revenue for the quarter declined 7.6% from last year.

Gross margin for the quarter narrowed to 39.4% from 42.9% a year ago.

Operating margin for the quarter shrank to 9.1% from 15.4% last year, mainly reflecting the impact of higher occupancy and selling costs in Europe due to retail expansion, negative same store sales on the company's fixed cost structure and increased investments in advertising.

In addition, product margins were lower, mainly driven by promotions in North America and the effect of pricing parity changes in Canada.

For the third quarter ended October 27, 2012, the Los Angeles, California-based company reported net income of $36.6 million or $0.43 per share, compared to $66.3 million or $0.71 per share for the year-ago quarter.

On average, 13 analysts polled by Thomson Reuters expected the company to earn $0.44 per share for the third quarter.

Total net revenue for the second quarter fell 2.2% to $628.83 million from $642.80 million in the same quarter last year. Eleven analysts had a consensus revenue estimate of $624.54 million for the third quarter.

Looking forward to the fourth quarter, the company forecast net revenues of $780 million to $800 million and earnings of $0.85 to $0.95 per share. Analysts currently expect the company to earn $0.95 per share on revenue of $789.17 million for the fourth quarter.

For the fiscal year ending February 2, 2013, the company now forecasts net revenues of $2.62 billion to $2.64 billion and earnings of $2.05 to $2.15 per share. Previously, the company forecast net revenues of $2.62 billion to $2.65 billion and earnings of $2.15 to $2.30 per share. Analysts currently expect the company to earn $2.16 per share on revenue of $2.63 billion for the fiscal year 2013.

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