Q2 Revenues Reached a Record of $522 Million, Compared to $515
Million Last Year Provides Q3 EPS Guidance in the Range of $0.46 to
$0.49 Increases Quarterly Dividend 25% to 12.5 Cents per Share
Second Quarter Fiscal 2010 Highlights - Global revenues increased
1% in US dollars and 9% in constant dollars. - Operating income
increased 7% to $91 million. - Operating margin expanded to 17.4%
vs. 16.5% last year. LOS ANGELES, Aug. 26 /PRNewswire-FirstCall/ --
Guess?, Inc. (NYSE:GES) today reported financial results for the
second quarter of its 2010 fiscal year, which ended August 1, 2009.
Second Quarter Fiscal 2010 Results For the second quarter of fiscal
2010, the Company reported record net earnings of $59.6 million, a
10.6% increase compared to net earnings of $53.8 million for the
second quarter of fiscal 2009. Diluted earnings per share increased
14.3%, reaching $0.64, compared to $0.56 for the prior-year
quarter. Paul Marciano, Chief Executive Officer, commented, "We are
extremely pleased with our second quarter financial performance. We
increased both revenues and earnings over last year's results to
record levels, which represents a significant achievement in
today's challenging environment. The actions that we took to
protect our margins and preserve our strong capital structure are
clearly paying off. In the period, we delivered strong product
margins, achieved significant SG&A leverage and generated solid
operating cash flow, further strengthening our capital structure.
Europe's performance was key to our results, posting revenue growth
of 21% and increasing operating earnings by 30% in the period.
Overall, these results truly underscore the strength and
versatility of our brand and demonstrate our team's ability to
adapt and deliver solid results, even in challenging conditions."
Mr. Marciano continued, "It is difficult to predict when the global
economy will ultimately recover. We will focus on what we can
control, running our business carefully and remaining flexible to
take advantage of opportunities. We are operating with an eye
toward the future, developing the necessary infrastructure and
capabilities today that will fuel our growth in the future. Our
commitment to expand internationally remains a top priority, with
Europe and Asia still representing the most significant
opportunities. We are excited about our future and believe that our
solid capital structure, our diversified business model and the
strength of the Guess? brand will all serve us well as we expand
our business around the world." Total net revenue for the second
quarter of fiscal 2010 increased 1.4% to $522.4 million from $515.2
million in the prior-year quarter. In constant dollars, total net
revenue increased 8.6%. The Company's retail stores in North
America generated revenue of $227.5 million in the second quarter
of fiscal 2010, a 6.1% decrease from $242.4 million in the same
period a year ago. Comparable store sales decreased 10.2% in local
currency and 12.5% in US dollars for the second quarter of fiscal
2010, compared to the same period a year ago. The Company operated
431 retail stores in the United States and Canada at the end of the
second quarter of fiscal 2010 versus 407 stores a year earlier. Net
revenue from the Company's wholesale segment, which includes the
Company's Asian operations, decreased 13.3% to $62.7 million in the
second quarter of fiscal 2010, from $72.4 million in the prior-year
period. Net revenue from the Company's European segment increased
20.6% to $210.2 million in the second quarter of fiscal 2010,
compared to $174.2 million in the prior-year period. In constant
dollars, net revenue increased 35.1%. Licensing segment net revenue
decreased 15.9% to $22.1 million in the second quarter of fiscal
2010, from $26.2 million in the prior-year period. Operating
earnings for the second quarter of fiscal 2010 increased 7.2% to
$91.1 million (including an $8.5 million negative currency
translation impact) from $85.0 million in the prior-year period.
Operating margin in the second quarter increased 90 basis points to
17.4%, compared to the prior-year's quarter. This margin expansion
was due to higher North American and Asian product margins and
SG&A leverage resulting from strong expense management. These
were partially offset by lower European product margins, mainly due
to the stronger US dollar, and occupancy deleverage due to the
negative comparable store sales. The current quarter's results
included an asset impairment charge of $0.4 million, compared to
$1.7 million in the prior-year quarter. The Company's effective tax
rate declined to 33.0% for the second quarter of fiscal 2010, from
36.0% for the second quarter of the prior year. Six-Month Period
Results For the six months ended August 1, 2009, the Company
reported net earnings of $92.1 million, a decrease of 9.4% compared
to net earnings of $101.6 million for the six months ended August
2, 2008. Diluted earnings per share decreased 7.5% to $0.99 per
share in the first six months of the 2010 fiscal year versus $1.07
per share in the comparable six-month period last year. Total net
revenue for the first six months of fiscal 2010 decreased 4.1% to
$963.6 million from $1,004.4 million in the prior-year period. In
constant dollars, total net revenue increased 4.1%. The Company's
retail stores in North America generated revenue of $435.0 million
in the first six months of fiscal 2010, a 4.2% decrease from $454.3
million in the same period a year ago. Comparable store sales
decreased 8.3% in local currency and 11.4% in US dollars for the
six months ended August 1, 2009, compared to the six months ended
August 2, 2008. Net revenue from the Company's wholesale segment,
which includes the Company's Asian operations, decreased 12.8% to
$128.6 million in the first six months of fiscal 2010, from $147.5
million in the prior-year period. Net revenue from the Company's
European segment increased 0.8% to $355.9 million in the first six
months of fiscal 2010, compared to $352.9 million in the prior-year
period. Licensing segment net revenue decreased 11.2% to $44.1
million in the first six months of fiscal 2009, from $49.7 million
in the prior-year period. Operating earnings for the first six
months of fiscal 2010 decreased 13.5% to $139.1 million (including
a $15.0 million unfavorable currency translation impact) from
$160.9 million in the prior-year period. Operating margin in the
first six months of fiscal 2010 decreased 160 basis points to
14.4%, compared to the prior-year period. This operating margin
decline was the result of lower European product margins, primarily
due to the stronger US dollar and occupancy deleverage due to the
negative comparable store sales. These were partially offset by
SG&A leverage resulting from strong expense management. Outlook
The Company's expectations for the third quarter of fiscal 2010
ending October 31, 2009, are as follows: -- Consolidated net
revenues are expected to range from $465 million to $485 million.
-- Operating margin is expected to be around 14%. -- Diluted
earnings per share are expected to be in the range of $0.46 to
$0.49. The Company's expectations include the unfavorable impact of
a shift of European sales from the third quarter into the second
quarter. The favorable impact of the shift on second quarter
earnings per share was $0.09. The Company had previously expected
the earnings per share impact of this shift would be between $0.03
and $0.04. The continued volatility in the global economy presents
a substantial challenge to forecasting future consumer behavior and
future financial results. Due to its limited visibility, the
Company is not providing specific revenue, operating margin or
diluted earnings per share guidance for the full fiscal year 2010.
Dividend The Company also announced today that its Board of
Directors has approved an increase of its quarterly cash dividend
to 12.5 cents per share on the Company's common stock, a 25%
increase over its most recent quarterly dividend. The dividend will
be payable on September 25, 2009 to shareholders of record at the
close of business on September 9, 2009. The Company will hold a
conference call at 4:30 pm (ET) on August 26, 2009 to discuss the
news announced in this press release. A live webcast of the
conference call will be accessible at http://www.guessinc.com/ via
the "Investor's Info" link. The webcast will be archived on the
website for 30 days. Guess?, Inc. designs, markets, distributes and
licenses a lifestyle collection of contemporary apparel, denim,
handbags, watches, footwear and other related consumer products. As
of August 1, 2009, the Company operated 431 retail stores in the
United States and Canada and 723 retail stores outside of North
America, of which 106 were directly owned. The Company also
distributes its products through better department and specialty
stores around the world. For more information about the Company,
please visit http://www.guessinc.com/. Except for historical
information contained herein, certain matters discussed in this
press release, including statements concerning the Company's future
prospects and guidance for the third quarter of fiscal 2010 are
forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are only expectations, and
involve known and unknown risks and uncertainties, which may cause
actual results in future periods to differ materially from what is
currently anticipated. Factors which may cause actual results in
future periods to differ materially from current expectations
include, among other things, domestic and international economic
conditions, including economic and other events that could
negatively impact consumer confidence and discretionary consumer
spending; our ability to, among other things, anticipate consumer
preferences, effectively operate our various retail concepts,
effectively manage inventories and successfully execute our
strategies, including our supply chain and international growth
strategies; and risks associated with changes in economic,
political, social and other conditions affecting our foreign
operations, including currency fluctuations. In addition to these
factors, the economic, litigation-related and other risks
identified in the Company's most recent annual report on Form 10-K
and other filings with the Securities and Exchange Commission,
including but not limited to the risk factors discussed therein,
could cause actual results to differ materially from current
expectations. Contact: Guess?, Inc. Investor Relations (213)
765-5578 Guess?, Inc. and Subsidiaries Condensed Consolidated
Statements of Income (amounts in thousands, except per share data)
Three Months Ended ---------------------------------- August 1,
August 2, 2009 2008 $ % $ % -------- ---- -------- ----- Net
revenue Product sales $500,364 95.8% $488,956 94.9% Net royalties
22,059 4.2% 26,216 5.1% -------- ---- -------- ----- 522,423 100.0%
515,172 100.0% Cost of product sales 290,646 55.6% 283,017 54.9%
-------- ---- -------- ----- Gross profit 231,777 44.4% 232,155
45.1% Selling, general and administrative expenses 140,663 27.0%
147,145 28.6% -------- ---- -------- ----- Earnings from operations
91,114 17.4% 85,010 16.5% Other income (expense): Interest expense
(339) (0.1%) (799) (0.2%) Interest income 447 0.1% 1,553 0.3%
Other, net (1,339) (0.2%) (724) (0.1%) -------- ---- -------- -----
Earnings before income taxes 89,883 17.2% 85,040 16.5% Income taxes
29,662 5.7% 30,616 6.0% -------- ---- -------- ----- Net earnings
60,221 11.5% 54,424 10.5% Net earnings attributable to
noncontrolling interests in subsidiaries 661 0.1% 592 0.1% --------
---- -------- ----- Net earnings attributable to Guess?, Inc.
$59,560 11.4% $53,832 10.4% ======== ==== ======== ===== Earnings
per common share attributable to common stockholders: Basic (1)
$0.65 $0.57 Diluted (1) $0.64 $0.56 Weighted average common shares
outstanding attributable to common stockholders: Basic 90,724
93,008 Diluted (1) 91,381 93,763 Six Months Ended
---------------------------------- August 1, August 2, 2009 2008 $
% $ % -------- ---- -------- ----- Net revenue Product sales
$919,491 95.4% $954,691 95.1% Net royalties 44,133 4.6% 49,701 4.9%
-------- ---- -------- ----- 963,624 100.0% 1,004,392 100.0% Cost
of product sales 554,344 57.5% 550,998 54.9% -------- ---- --------
----- Gross profit 409,280 42.5% 453,394 45.1% Selling, general and
administrative expenses 270,132 28.1% 292,459 29.1% -------- ----
-------- ----- Earnings from operations 139,148 14.4% 160,935 16.0%
Other income (expense): Interest expense (945) (0.1%) (1,824)
(0.2%) Interest income 1,184 0.2% 3,086 0.3% Other, net (73) 0.0%
(1,632) (0.1%) -------- ---- -------- ----- Earnings before income
taxes 139,314 14.5% 160,565 16.0% Income taxes 45,974 4.8% 57,805
5.8% -------- ---- -------- ----- Net earnings 93,340 9.7% 102,760
10.2% Net earnings attributable to noncontrolling interests in
subsidiaries 1,238 0.1% 1,127 0.1% -------- ---- -------- ----- Net
earnings attributable to Guess?, Inc. $92,102 9.6% $101,633 10.1%
======== ==== ======== ===== Earnings per common share attributable
to common stockholders: Basic (1) $1.00 $1.07 Diluted (1) $0.99
$1.07 Weighted average common shares outstanding attributable to
common stockholders: Basic 90,678 92,979 Diluted (1) 91,253 93,784
(1) The Company adopted a new accounting pronouncement in the first
quarter of fiscal 2010 that requires the Company to exclude certain
earnings and shares related to participating securities from the
computation of earnings per common share. The net earnings
attributable to participating securities were approximately $840
and $982 in the second quarter of fiscal 2010 and fiscal 2009,
respectively, and the amount of participating shares for the same
periods were 109 and 130, respectively. The effect of the new
accounting pronouncement on diluted earnings per common share is to
reduce both the current quarter and the prior year quarter by
approximately $0.01 per share, reduce the current year-to-date
period by approximately $0.02 per share and reduce the prior
year-to-date period by approximately $0.01 per share. The prior
year's earnings per share has been adjusted to reflect the change.
Guess?, Inc. and Subsidiaries Consolidated Segment Data (dollars in
thousands) Three Months Ended ------------------------- August 1,
August 2, % 2009 2008 chg -------- -------- --- Net revenue: Retail
operations $227,460 $242,360 -6% Wholesale operations 62,745 72,363
-13% European operations 210,159 174,233 21% Licensing operations
22,059 26,216 -16% -------- -------- $522,423 $515,172 1% ========
======== Earnings (loss) from operations: Retail operations $30,208
$30,136 0% Wholesale operations 9,892 10,791 -8% European
operations 52,293 40,126 30% Licensing operations 18,672 22,530
-17% Corporate overhead (19,951) (18,573) 7% -------- --------
$91,114 $85,010 7% ======== ======== Operating margins: Retail
operations 13.3% 12.4% Wholesale operations 15.8% 14.9% European
operations 24.9% 23.0% Licensing operations 84.6% 85.9% Total
Company 17.4% 16.5% Six Months Ended --------------------------
August 1, August 2, % 2009 2008 chg -------- -------- --- Net
revenue: Retail operations $435,020 $454,297 -4% Wholesale
operations 128,614 147,497 -13% European operations 355,857 352,897
1% Licensing operations 44,133 49,701 -11% -------- ----------
$963,624 $1,004,392 -4% ======== ========== Earnings (loss) from
operations: Retail operations $48,215 $52,980 -9% Wholesale
operations 17,314 23,345 -26% European operations 75,432 80,087 -6%
Licensing operations 37,687 42,777 -12% Corporate overhead (39,500)
(38,254) 3% -------- ---------- $139,148 $160,935 -14% ========
========== Operating margins: Retail operations 11.1% 11.7%
Wholesale operations 13.5% 15.8% European operations 21.2% 22.7%
Licensing operations 85.4% 86.1% Total Company 14.4% 16.0% Guess?,
Inc. and Subsidiaries Selected Condensed Consolidated Balance Sheet
Data (in thousands) August 1, January 31, August 2, 2009 2009 2008
---------- ---------- ---------- ASSETS Cash and cash equivalents
$329,707 $294,118 $294,481 Receivables, net 297,031 262,349 292,401
Inventories 258,612 239,675 258,888 Other current assets 82,528
98,047 59,293 Property and equipment, net 249,147 221,416 252,464
Other assets 145,781 130,961 159,763 ---------- ----------
---------- Total Assets $1,362,806 $1,246,566 $1,317,290 ==========
========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current
portion of borrowings and capital lease obligations $2,968 $24,018
$40,703 Other current liabilities 329,157 311,866 390,433 Borrowing
and capital lease obligations 15,394 14,586 18,173 Other long-term
liabilities 118,557 110,592 124,227 Redeemable and nonredeemable
noncontrolling interests 17,426 12,503 9,600 Guess?, Inc.
stockholders' equity 879,304 773,001 734,154 ---------- ----------
---------- Total Liabilities and Stockholders' Equity $1,362,806
$1,246,566 $1,317,290 ========== ========== ========== Guess?, Inc.
and Subsidiaries Condensed Consolidated Cash Flow Data (in
thousands) Six Months Ended -------------------- August 1, August
2, 2009 2008 --------- --------- Net cash provided by operating
activities $120,630 $116,181 Net cash used in investing activities
(43,331) (60,070) Net cash used in financing activities (46,408)
(38,763) Effect of exchange rates on cash 4,698 1,538 --------
-------- Net increase in cash and cash equivalents 35,589 18,886
Cash and cash equivalents at the beginning of the year 294,118
275,595 -------- -------- Cash and cash equivalents at the end of
the period $329,707 $294,481 ======== ======== Supplemental
information: Depreciation and amortization $30,535 $29,378 Rent
84,506 76,703 Guess?, Inc. and Subsidiaries Retail Store Data
International Store Count As of August 1, 2009 Directly Total
Operated Region Stores Stores ------ -------- United States and
Canada 431 431 Europe and Middle East 348 68 Asia 323 26 Other 52
12 ------ ------ 1,154 537 ====== ====== Guess?, Inc. and
Subsidiaries Retail Store Data U.S. and Canada Six Months Ended
--------------------- August 1, August 2, 2009 2008 ---------
---------- Number of stores at the beginning of the year 425 373
Store openings 11 35 Store closures (5) (1) --------- ---------
Number of stores at the end of the period 431 407 =========
========= Total store square footage at the end of the period
1,980,000 1,883,000 ========= ========= DATASOURCE: Guess?, Inc.
CONTACT: Guess?, Inc., Investor Relations, +1-213-765-5578 Web
Site: http://www.guess.com/
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