Guess?, Inc. Reports Record Third Quarter Earnings Q3 EPS Reached A Record of $0.69, Compared to $0.67 Last Year

Provides Q4 EPS Guidance in the Range of $0.77 to $0.80

Provides Current Fiscal Year EPS Guidance in the Range of $2.45 to $2.48

Third Quarter Fiscal 2010 Highlights

- Global revenues reached $523 million, compared to $528 million last year

- Product margins improved across all business segments

- Operating margin reached 18.9% vs. 18.8% last year

- Cash increased to $345 million, compared to $237 million last year

LOS ANGELES, Nov. 30 /PRNewswire-FirstCall/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the third quarter of its 2010 fiscal year, which ended October 31, 2009.

Third Quarter Fiscal 2010 Results

For the third quarter of fiscal 2010, the Company reported record net earnings of $64.1 million, a slight increase compared to net earnings of $64.0 million for the third quarter of fiscal 2009. Diluted earnings per share increased 3.0%, reaching $0.69, compared to $0.67 for the prior-year quarter.

Paul Marciano, Chief Executive Officer, commented, "We are very pleased with the position of our Company today. Our brand enjoys significant momentum worldwide and our management team continues to execute well. We are gaining share in key markets, generating strong cash flows and delivering solid returns. As we look into the future, we will continue to fund key growth initiatives and invest in our infrastructure. International expansion remains a high priority for us and we plan to resume retail development in North America and expand our retail presence in other countries as well."

Mr. Marciano continued, "Our third quarter financial results exceeded our expectations. 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. There have been many challenges over the past year, and we responded well to them. As a result, we are a stronger company today. Through it all, we have remained true to our brand and focused on our customer, always delivering outstanding product and improving our service in our stores. We strongly believe that we are well positioned to achieve our objectives for growth and profitability."

Total net revenue for the third quarter of fiscal 2010 decreased 1.0% to $522.8 million from $527.9 million in the prior-year quarter. Currency translation did not have a material effect on total revenues in the quarter. The Company's retail stores in North America generated net revenue of $239.5 million in the third quarter of fiscal 2010, a 1.9% increase from $235.1 million in the same period a year ago. Comparable store sales decreased 3.4% for the third quarter of fiscal 2010, compared to the same period a year ago. The Company operated 433 retail stores in the United States and Canada at the end of the third quarter of fiscal 2010 versus 422 stores a year earlier.

Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 10.0% to $86.7 million in the third quarter of fiscal 2010, from $78.8 million in the prior-year period.

As expected, net revenue from the Company's European segment decreased 9.3% to $168.8 million in the third quarter of fiscal 2010, compared to $186.2 million in the prior-year period, due to a shift in shipments from the current year's third quarter into the second quarter.

Licensing segment net revenue decreased 0.4% to $27.8 million in the third quarter of fiscal 2010, from $27.9 million in the prior-year period.

Operating earnings for the third quarter of fiscal 2010 decreased 0.4% to $99.0 million from $99.4 million in the prior-year period. Currency translation did not have a material effect on operating profit in the quarter. Operating margin in the third quarter increased 10 basis points to 18.9%, compared to the prior-year's quarter. This operating margin increase was due to higher product margins in all segments and SG&A leverage resulting from strong expense management. These improvements were nearly offset by occupancy deleverage due to negative comparable store sales and a greater mix of European retail stores.

The Company's effective tax rate for the quarter was 33%, essentially flat to the prior year quarter.

Nine-Month Period Results

For the nine months ended October 31, 2009, the Company reported net earnings of $156.2 million, a decrease of 5.7% compared to net earnings of $165.7 million for the nine months ended November 1, 2008. Diluted earnings per share decreased 3.4% to $1.68 per share in the first nine months of the 2010 fiscal year versus $1.74 per share in the comparable nine-month period last year.

Total net revenue for the first nine months of fiscal 2010 decreased 3.0% to $1,486.4 million from $1,532.3 million in the prior-year period. In constant dollars, total net revenue increased 2.3%. The Company's retail stores in North America generated revenue of $674.5 million in the first nine months of fiscal 2010, a 2.2% decrease from $689.4 million in the same period a year ago. Comparable store sales decreased 6.8% in local currency and 8.6% in US dollars for the nine months ended October 31, 2009, compared to the nine months ended November 1, 2008. Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, decreased 4.9% to $215.3 million in the first nine months of fiscal 2010, from $226.3 million in the prior-year period. Net revenue from the Company's European segment decreased 2.7% to $524.7 million in the first nine months of fiscal 2010, compared to $539.1 million in the prior-year period. (In local currency, European segment revenues increased 5.7% for the first nine months of fiscal 2010.) Licensing segment net revenue decreased 7.3% to $71.9 million in the first nine months of fiscal 2010, from $77.6 million in the prior-year period.

Operating earnings for the first nine months of fiscal 2010 decreased 8.5% to $238.1 million (including a $15.5 million unfavorable currency translation impact) from $260.3 million in the prior-year period. Operating margin in the first nine months of fiscal 2010 decreased 100 basis points to 16.0%, compared to the prior-year period. This operating margin decline was the result of lower European product margins, primarily due to the impact of the stronger US dollar on product purchases and occupancy deleverage due to the negative comparable store sales, which were partially offset by higher product margins in North America and Asia and SG&A expense leverage.

Outlook

The Company's expectations for the fourth quarter of fiscal 2010 ending January 30, 2010, are as follows:

  • Consolidated net revenues are expected to range from $585 million to $605 million.
  • Operating margin is expected to be around 18%.
  • Diluted earnings per share are expected to be in the range of $0.77 to $0.80.

The Company's expectations for the full fiscal year ending January 30, 2010 are as follows:

  • Consolidated net revenues are expected to range from $2.07 billion to $2.09 billion.
  • Operating margin is expected to be around 16.5%.
  • Diluted earnings per share are expected to range from $2.45 to $2.48.

Dividend

The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.125 per share on the Company's common stock. The dividend will be payable on December 31, 2009 to shareholders of record at the close of business on December 16, 2009.

The Company will hold a conference call at 4:30 pm (ET) on November 30, 2009 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at 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 October 31, 2009, the Company operated 433 retail stores in the United States and Canada and 753 retail stores outside of North America, of which 115 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 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 fourth quarter and full year 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
                   ------------------------------------
                      October 31,         November 1,
                         2009                2008
                      $        %          $        %
                   --------  ------    --------  ------
Net revenue
  Product sales    $494,998   94.7%    $499,994   94.7%
  Net royalties      27,814    5.3%      27,934    5.3%
                   --------  ------    --------  ------
                    522,812  100.0%     527,928  100.0%

Cost of product
 sales              285,921   54.7%     286,116   54.2%
                   --------  ------    --------  ------

Gross profit        236,891   45.3%     241,812   45.8%

Selling,
 general and
 administrative
 expenses           137,917   26.4%     142,432   27.0%
                   --------  ------    --------  ------

Earnings from
 operations          98,974   18.9%      99,380   18.8%

Other income (expense):
  Interest
   expense             (778)  (0.1%)     (1,706)  (0.3%)
  Interest
   income               277    0.1%       2,000    0.4%
  Other, net         (1,340)  (0.3%)     (3,717)  (0.7%)
                   --------  ------    --------  ------

Earnings before
 income taxes        97,133   18.6%      95,957   18.2%

Income taxes         32,054    6.2%      31,721    6.0%
                   --------  ------    --------  ------

Net earnings         65,079   12.4%      64,236   12.2%

Net earnings
 attributable to
 noncontrolling
 interests in
 subsidiaries         1,009    0.1%         219    0.1%
                   --------  ------    --------  ------

Net earnings
 attributable to
 Guess?, Inc.       $64,070   12.3%     $64,017   12.1%
                   ========  ======    ========  ======

Earnings per common
 share attributable
 to common
 stockholders:

  Basic (1)           $0.69               $0.68

  Diluted (1)         $0.69               $0.67

Weighted average
 common shares
 outstanding
 attributable
 to common
 stockholders:

  Basic              90,941              92,438

  Diluted (1)        91,778              93,140


                            Nine Months Ended
                   ------------------------------------
                      October 31,         November 1,
                         2009                2008
                      $        %          $        %
                   --------  ------    --------  ------
Net revenue
  Product sales  $1,414,489   95.2%  $1,454,685   94.9%
  Net royalties      71,947    4.8%      77,635    5.1%
                   --------  ------    --------  ------
                  1,486,436  100.0%   1,532,320  100.0%

Cost of product
 sales              840,265   56.5%     837,114   54.6%
                   --------  ------    --------  ------

Gross profit        646,171   43.5%     695,206   45.4%

Selling,
 general and
 administrative
 expenses           408,049   27.5%     434,891   28.4%
                   --------  ------    --------  ------

Earnings from
 operations         238,122   16.0%     260,315   17.0%

Other income (expense):
  Interest
   expense           (1,723)  (0.1%)     (3,530)  (0.2%)
  Interest
   income             1,461    0.1%       5,086    0.3%
  Other, net         (1,413)  (0.1%)     (5,349)  (0.4%)
                   --------  ------    --------  ------

Earnings before
 income taxes       236,447   15.9%     256,522   16.7%

Income taxes         78,028    5.2%      89,526    5.8%
                   --------  ------    --------  ------

Net earnings        158,419   10.7%     166,996   10.9%

Net earnings
 attributable to
 noncontrolling
 interests in
 subsidiaries         2,247    0.2%       1,346    0.1%
                   --------  ------    --------  ------

Net earnings
 attributable to
 Guess?, Inc.      $156,172   10.5%    $165,650   10.8%
                   ========  ======    ========  ======


Earnings per common
 share attributable
 to common
 stockholders:

  Basic (1)           $1.70               $1.75

  Diluted (1)         $1.68               $1.74

Weighted average
 common shares
 outstanding
 attributable
 to common
 stockholders:

  Basic              90,765              92,799

  Diluted (1)        91,416              93,533

(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 $886 and $1,159 in the
third quarter of fiscal 2010 and fiscal 2009, respectively, and the
amount of participating shares for the same periods were 160 and 169,
respectively. The effect of the new accounting pronouncement on diluted
earnings per common share is to reduce the current quarter by
approximately $0.01 per share, reduce the prior year quarter by
approximately $0.02 per share and reduce both the current year-to-date
period and the prior year-to-date period by approximately $0.03 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           Nine Months Ended
              ---------------------------  ---------------------------
             October 31,  November 1,  %   October 31, November 1,  %
                2009         2008     chg     2009        2008     chg
              --------     --------   ---  ----------  ---------   ---
Net revenue:
  Retail
   operations $239,518     $235,074    2%   $674,538   $689,371    -2%
  Wholesale
   operations   86,651       78,760   10%    215,265    226,257    -5%
  European
   operations  168,829      186,160   -9%    524,686    539,057    -3%
  Licensing
   operations   27,814       27,934    0%     71,947     77,635    -7%
              --------     --------        ----------  ---------
              $522,812     $527,928   -1% $1,486,436 $1,532,320    -3%
              ========     ========        ==========  =========

Earnings (loss)
 from operations:
  Retail
   operations  $33,110      $27,378   21%    $81,325    $80,358     1%
  Wholesale
   operations   17,717       13,839   28%     35,031     37,184    -6%
  European
   operations   40,801       49,541  -18%    116,233    129,628   -10%
  Licensing
   operations   24,176       24,075    0%     61,863     66,852    -7%
  Corporate
   overhead    (16,830)     (15,453)   9%    (56,330)   (53,707)    5%
              --------     --------        ----------  ---------
               $98,974      $99,380    0%   $238,122   $260,315    -9%
              ========     ========        ==========  =========

Operating margins:
  Retail
   operations     13.8%        11.6%            12.1%      11.7%
  Wholesale
   operations     20.4%        17.6%            16.3%      16.4%
  European
   operations     24.2%        26.6%            22.2%      24.0%
  Licensing
   operations     86.9%        86.2%            86.0%      86.1%
  Total Company   18.9%        18.8%            16.0%      17.0%

                      Guess?, Inc. and Subsidiaries
            Selected Condensed Consolidated Balance Sheet Data
                               (in thousands)

                                October 31,    January 31, November 1,
                                   2009           2009        2008
                                ----------     ----------  ----------
                          ASSETS

Cash and cash equivalents        $344,862       $294,118    $236,601

Receivables, net                  318,472        262,349     299,653

Inventories                       261,880        239,675     252,973

Other current assets               81,976         98,047      67,856

Property and equipment, net       254,259        221,416     243,704

Other assets                      147,869        130,961     145,893
                               ----------     ----------  ----------

  Total Assets                 $1,409,318     $1,246,566  $1,246,680
                               ==========     ==========  ==========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current portion of borrowings
 and capital lease obligations     $2,577        $24,018     $45,555

Other current liabilities         300,700        311,866     300,573

Borrowing and capital lease
 obligations                       15,457         14,586      14,494

Other long-term liabilities       119,420        110,592     121,181

Redeemable and nonredeemable
 noncontrolling interests          19,209         12,503       8,132

Guess?, Inc. stockholders'
 equity                           951,955        773,001     756,745
                               ----------     ----------  ----------

  Total Liabilities and
   Stockholders' Equity        $1,409,318     $1,246,566  $1,246,680
                               ==========     ==========  ==========

                      Guess?, Inc. and Subsidiaries
                   Condensed Consolidated Cash Flow Data
                              (in thousands)

                                               Nine Months Ended
                                          -----------------------------
                                          October 31,       November 1,
                                             2009              2008
                                           --------         ---------
Net cash provided by operating activities  $165,401          $93,447

Net cash used in investing activities       (66,058)         (82,435)

Net cash used in financing activities       (54,356)         (41,235)

Effect of exchange rates on cash              5,757           (8,771)
                                           --------         ---------

Net increase (decrease) in cash and
 cash equivalents                            50,744          (38,994)

Cash and cash equivalents at the beginning
 of the year                                294,118          275,595
                                           --------         ---------

Cash and cash equivalents at the end of
 the period                                $344,862         $236,601
                                           ========         =========

Supplemental information:

Depreciation and amortization               $47,093          $45,015

Rent                                        130,298          117,966

                       Guess?, Inc. and Subsidiaries
                            Retail Store Data
                         International Store Count
                           As of October 31, 2009

                                                               Directly
                                              Total            Operated
                                              Stores            Stores
                                             --------          --------
Region
  United States and Canada                      433               433

  Europe and Middle East                        373                77

  Asia                                          327                25

  Other                                          53                13
                                             --------          --------

                                              1,186               548
                                             ========          ========

                      Guess?, Inc. and Subsidiaries
                            Retail Store Data
                             U.S. and Canada

                                               Nine Months Ended
                                          -----------------------------
                                          October 31,       November 1,
                                             2009              2008
                                          ---------         -----------

Number of stores at the beginning of the year   425               373

  Store openings                                 13                50

  Store closures                                (5)               (1)
                                          ---------         ---------

Number of stores at the end of the period       433               422
                                          =========         =========

Total store square footage at the end of
 the period                               1,992,000         1,944,000
                                          =========         =========

SOURCE Guess?, Inc.



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