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Guess Q3 Earnings Rise, Top Estimate; Guides Q4 Above Consensus

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International fashion house Guess?, Inc. (GES) said Monday after the markets closed that its third quarter profit increased slightly from last year even as revenue decreased 1%. The company's quarterly earnings per share breezed past analysts' as well as its own expectations. At the same time, the company forecast fourth quarter revenue and earnings above analysts' current consensus estimates.

The Los Angeles-based company reported net income for the third quarter of $64.1 million or $0.69 per share, compared to $64.0 million or $0.67 per share for the year-ago quarter.

On average, 13 analysts polled by Thomson Reuters expected the company to earn $0.51 per share for the third quarter. Analysts' estimates typically exclude special items.

Operating earnings for the third quarter decreased 0.4% to $99.0 million from $99.4 million in the prior year quarter.

The company's operating margin for the quarter increased to 18.9% from 18.8% a year earlier due to higher product margins in all segments and tight cost control. Selling, general and administrative expenses as a percentage of revenue fell to 26.4% from 27.0% last year.

Total net revenue for the third quarter declined 1% to $522.81 million from $527.93 million in the same quarter last year. Ten analysts had a consensus revenue estimate of $482.57 million for the third quarter.

Guess had forecast revenue of $465 million to $485 million and earnings of $0.46 to $0.49 per share for the third quarter.

Paul Marciano, Chief Executive Officer, said, "Each of our businesses performed better than expected in both revenues and earnings, as our customer continued to respond well to our product assortment in all markets around the world. In addition, we managed well, controlling our costs and inventories tightly to protect our profitability. This solid performance resulted in record third quarter earnings and a significant improvement in our cash flows in the period."

Third quarter revenue from the company's retail stores in North America increased 1.9% to $239.5 million from $235.1 million a year ago. Same-store sales for the quarter fell 3.4%.

The company operated 433 retail stores in the United States and Canada at the end of the third quarter, compared to 422 stores a year earlier.

Revenue from the company's wholesale segment, which includes its Asian operations, rose 10% to $86.7 million in the third quarter from $78.8 million in the year-ago quarter.

Third quarter revenue from the company's European segment fell 9.3% to $168.8 million from $186.2 million in the prior year quarter, due to a shift in shipments from the current year's third quarter into the second quarter.

Licensing segment revenue for the quarter decreased 0.4% to $27.8 million from $27.8 million in the prior year quarter.

For the first nine months of its fiscal year, the company reported net income of $156.2 million or $1.68 per share, compared to $165.7 million or $1.74 per share for the same period last year.

Total net revenue for the nine-month period fell 3% to $1.49 billion from $1.53 billion in the prior year period.

The company also said that its Board of Directors has approved a quarterly cash dividend of $0.125 per share, payable on December 31 to shareholders of record on December 16.

Looking forward to the fourth quarter, which includes the all-important holiday season, the company said it expects total net revenue of $585 million to $605 million and earnings of $0.77 to $0.80 per share. Analysts currently expect the company to earn $0.69 per share on revenue of $563.79 million for the fourth quarter.

For the fiscal year ending January 30, 2010, the company expects total net revenue of $2.07 billion to $2.09 billion and earnings of $2.45 to $2.48 per share. Analysts currently expect the company to earn $2.19 per share on revenue of $2.01 billion for the current fiscal year.

Among others in the industry, Gap Inc. (GPS) earlier this month reported a 25% rise in third quarter profit, driven by higher margins and improved sales at Old Navy stores.

Also this month, Polo Ralph Lauren Corp. (RL) reported a 10% increase in second quarter profit, helped by higher margins as well as a lower tax rate.

Guess shares, which have traded in a range of $11.27 to $41.34 over the past year, closed Monday's regular trading session at $37.05, down 42 cents or 1.12%. The stock is currently gaining $2.28 or 6.15% in after hours trading.

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