Guess?, Inc. Reports Record First Quarter Results

LOS ANGELES, May 27 /PRNewswire-FirstCall/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the first quarter of its 2011 fiscal year, which ended May 1, 2010.

First Quarter Fiscal 2011 Results

For the first quarter of fiscal 2011, the Company reported net earnings of $50.3 million, an increase of 55% compared to net earnings of $32.5 million for the first quarter of fiscal 2010.  Diluted earnings per share increased 54% to $0.54 in the current quarter, compared to $0.35 in the prior-year quarter.  In the quarter, the Company recorded a $5.8 million charge, or $0.04 per share, related to the acceleration of pension cost amortization resulting from the departure of Carlos Alberini from the Company's supplemental executive retirement plan.  

Paul Marciano, Chief Executive Officer, commented, "We are very pleased with our strong performance this quarter.  We achieved excellent results across all of our businesses around the world, with each of our segments delivering double-digit revenue growth and improving their profitability significantly.  In North America, we posted a 9.7% same store sales increase and our international expansion drove significant growth in the period.  Europe and Asia combined represented almost 60% of our quarterly revenue increase.  We managed our business effectively, which resulted in an operating margin expansion of 230 basis points, even as we continued to invest in our infrastructure to support our ambitious growth initiatives."

Mr. Marciano continued, "We remain focused on our key priorities for this year: to increase sales productivity across all businesses, to grow our European and Asian businesses and to expand our retail store base in North America.  Our brand enjoys tremendous momentum worldwide and we strive to achieve its full potential as we develop our business in many markets where the brand is well known.  We have a dedicated management team, a successful and diversified business model and a solid capital structure that position us well to continue to grow our business and deliver solid returns for our shareholders."

Total net revenue for the first quarter of fiscal 2011 increased 22% to $539.3 million from $441.2 million in the prior-year quarter.  The Company's retail stores in North America generated revenue of $235.8 million in the first quarter of fiscal 2011, a 13.6% increase from $207.6 million in the same period a year ago.  Comparable store sales increased 9.7% (5.8% in constant dollars) for the first quarter of fiscal 2011, compared to the same period a year ago.  The Company operated 433 retail stores in the U.S. and Canada at the end of the first quarter of fiscal 2011 versus 429 stores a year earlier.

Net revenue from the Company's North American wholesale segment increased 27.3% to $42.7 million in the first quarter of fiscal 2011, from $33.6 million in the prior-year period.

Net revenue from the Company's Europe segment increased 28.3% to $187.0 million in the first quarter of fiscal 2011, compared to $145.7 million in the prior-year period.

Net revenue from the Company's Asia segment increased 50.4% to $48.6 million in the first quarter of fiscal 2011, from $32.3 million in the prior-year period.

Licensing segment net revenue increased 14.6% to $25.3 million in the first quarter of fiscal 2011, from $22.1 million in the prior-year period.

Operating earnings for the first quarter of fiscal 2011 increased 48.5% to $71.3 million (including a $5.0 million favorable currency translation benefit) from $48.0 million in the prior-year period.  Operating margin in the first quarter increased 230 basis points to 13.2%, compared to the prior-year's quarter.  This margin expansion was the result of higher product margins in all segments along with occupancy leverage due to the positive same store sales, partially offset by the impact of the accelerated pension cost amortization.

The Company's effective tax rate declined to 31.0% for the first quarter of fiscal 2011, from 33.0% for the first quarter of the prior year.

Outlook

The Company's expectations for the second quarter of fiscal 2011 ending July 31, 2010, are as follows:

• Consolidated net revenues are expected to range from $560 million to $575 million.
• Operating margin is expected to be around 16.0%.
• Diluted earnings per share are expected to be in the range of $0.65 to $0.68.

The Company updated its outlook for the fiscal year ending January 29, 2011, which is now as follows:

• Consolidated net revenues are expected to range from $2.35 billion to $2.40 billion.
• Operating margin is expected to be about 16.5%.
• Diluted earnings per share are expected to be in the range of $2.80 to $2.85.

Based on the continued strengthening of the US dollar against the Euro, this full year outlook includes a further negative translation and margin impact on diluted earnings per share of $0.16 for the remainder of fiscal 2011.  This is in addition to the $0.12 negative translation impact that the Company had initially expected for the same period.

Dividend

The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.16 per share on the Company's common stock.  The dividend will be payable on June 25, 2010 to shareholders of record at the close of business on June 9, 2010.

Change in Segment Reporting

In the first quarter of fiscal 2011, the Company revised its segment reporting to include its North American wholesale and Asia operations as separate segments.  The Company believes this segment reporting better reflects how its five business segments – North American retail, North American wholesale, Europe, Asia and licensing – are managed and each segment's performance is evaluated.  The North American retail segment includes the Company's retail operations in North America.  The North American wholesale segment includes the Company’s wholesale operations in North America.  The Europe segment includes both wholesale and retail operations in Europe.  The Asia segment includes both wholesale and retail operations in Asia.  The licensing segment includes the worldwide licensing operations of the Company.  All amounts for fiscal 2010 have been revised to conform to the fiscal 2011 presentation and are included with this release.

The Company will hold a conference call at 5:00 pm (ET) on May 27, 2010 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 May 1, 2010, the Company operated 433 retail stores in the United States and Canada and 817 retail stores outside of North America, of which 137 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 growth plans and future prospects, including guidance for the second quarter and full year of fiscal 2011, 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.

SOURCE Guess?, Inc.