Published: November 23, 2010
GUESS?, INC. REPORTS 9% INCREASE IN THIRD QUARTER EPS TO $0.75
LOS ANGELES, Nov. 23, 2010 /PRNewswire-FirstCall/ --
Third Quarter Fiscal 2011 Highlights
-- Third quarter revenue increased 17% to a record of $614 million
-- European revenue increased 40% in local currency and 28% in US
dollars
-- Asian revenue increased 35%
-- North American retail revenue increased 6%
-- Operating margin, including impairment charges, declined 380 basis
points to 15.1% from 18.9%
-- Net earnings increased 8% to $69 million
Guess?, Inc. (NYSE: GES) today reported financial results for the third quarter of its 2011 fiscal year, which ended October 30, 2010.
Third Quarter Fiscal 2011 Results
For the third quarter of fiscal 2011, the Company reported record net earnings of $69.1 million, a 7.8% increase compared to net earnings of $64.1 million for the third quarter of fiscal 2010. Diluted earnings per share increased 8.7%, reaching $0.75, compared to $0.69 for the prior-year quarter.
Paul Marciano, Chief Executive Officer, commented, "We are very pleased with our third quarter performance, which exceeded our expectations for top line growth, operating margin and earnings. We grew all of our businesses and made significant progress on several key initiatives. We expanded our retail presence, opening 84 new stores around the world. Our international expansion continues to drive our growth, with Europe and Asia combining to contribute two-thirds of this quarter's revenue increase. And, we continued to build management strength, filling several key positions during the quarter."
Mr. Marciano continued, "As a Company, we remain focused on delivering value to our shareholders. Our strong capital structure and significant cash position give us the flexibility to significantly enhance our dividend program while continuing to invest in our future. Our commitment and belief in the Guess brand and its long term potential has never been stronger. While our brand already enjoys tremendous recognition around the world, we know that there are many regions where our current business has much more potential. Our success in new international markets validates this conviction. Our strategy is to continue to invest in our brand and business, developing new markets while building the necessary infrastructure and partnerships to support our growth. Above all, we will protect our most important asset - the Guess brand - by constantly adapting ourselves to the new world, but always maintaining integrity and staying true to who we are."
Total net revenue for the third quarter of fiscal 2011 increased 17.4% to $613.9 million from $522.8 million in the prior-year quarter. In constant dollars, total net revenue increased 20.6%.
The Company's retail stores in North America generated revenue of $253.7 million in the third quarter of fiscal 2011, a 5.9% increase from $239.5 million in the same period a year ago. Comparable store sales increased 1.5% in US dollars and 0.6% in local currency for the third quarter of fiscal 2011, compared to the same period a year ago. The Company owned and operated 473 retail stores in the United States and Canada at the end of the third quarter of fiscal 2011 versus 433 stores a year earlier.
Net revenue from the Company's North American wholesale segment increased 22.0% to $56.3 million in the third quarter of fiscal 2011, from $46.1 million in the prior-year period.
Net revenue from the Company's Europe segment increased 28.0% to $216.2 million in the third quarter of fiscal 2011, compared to $168.8 million in the prior-year period. In local currency, net revenue increased 40.5%.
Net revenue from the Company's Asia segment increased 35.1% to $54.8 million in the third quarter of fiscal 2011, from $40.5 million in the prior-year period.
Licensing segment net revenue increased 18.6% to $33.0 million in the third quarter of fiscal 2011, from $27.8 million in the prior-year period.
Operating earnings for the third quarter of fiscal 2011 decreased 6.3% to $92.7 million (including a $3.7 million unfavorable currency translation impact) from $99.0 million in the prior-year period. Operating margin in the third quarter decreased 380 basis points to 15.1%, compared to the prior-year quarter. The decline in operating margin primarily reflects the effect of currency on product purchases, the impact of higher markdowns, higher store selling and infrastructure costs to support the Company's global retail expansion, store impairment charges in North America and Europe and higher performance-based compensation. Other net income, which primarily relates to net unrealized mark-to-market gains on non-operating assets and foreign currency contracts and balances, was $5.9 million for the third quarter of fiscal 2011, compared to other net expense of $1.3 million in the prior-year's quarter.
The Company's effective tax rate declined to 29.1% for the third quarter of fiscal 2011, from 33.0% for the third quarter of the prior year.
Nine-Month Period Results
For the nine months ended October 30, 2010, the Company reported net earnings of $186.2 million, an increase of 19.2% compared to net earnings of $156.2 million for the nine months ended October 31, 2009. Diluted earnings per share increased 19.0% to $2.00 per share in the first nine months of the 2011 fiscal year versus $1.68 per share in the comparable nine-month period last year.
Total net revenue for the first nine months of fiscal 2011 increased 16.4% to $1,730.4 million from $1,486.4 million in the prior-year period. In constant dollars, total net revenue increased 17.0%. The Company's retail stores in North America generated revenue of $731.3 million in the first nine months of fiscal 2011, an 8.4% increase from $674.5 million in the same period a year ago. Comparable store sales increased 2.6% in local currency and 4.7% in US dollars for the nine months ended October 30, 2010, compared to the nine months ended October 31, 2009. Net revenue from the Company's North America wholesale segment increased 26.9% to $143.3 million in the first nine months of fiscal 2011, from $112.9 million in the prior-year period. Net revenue from the Company's Europe segment increased 19.2% to $625.5 million in the first nine months of fiscal 2011, compared to $524.7 million in the prior-year period. In local currency, Europe segment revenue increased 26.0%. Net revenue from the Company's Asia segment increased 42.2% to $145.5 million in the first nine months of fiscal 2011, compared to $102.4 million in the prior-year period. Licensing segment net revenue increased 17.9% to $84.8 million in the first nine months of fiscal 2011, from $71.9 million in the prior-year period.
Operating earnings for the first nine months of fiscal 2011 increased 9.3% to $260.3 million (including a $2.7 million unfavorable currency translation impact) from $238.1 million in the prior-year period. Operating margin in the first nine months of fiscal 2011 decreased 100 basis points to 15.0%, compared to the prior-year period. This operating margin decline was primarily the result of higher store selling and infrastructure costs to support the Company's global retail expansion, higher marketing investments, store impairment charges in North America and Europe and the pension curtailment expense recorded in the first quarter of fiscal 2011. Other net income, which primarily relates to net unrealized mark-to-market gains on non-operating assets and foreign currency contracts and balances, was $9.0 million for the first nine months of fiscal 2011, compared to other net expense of $1.4 million in the prior-year period.
Outlook
The Company's expectations for the fourth quarter of fiscal 2011 ending January 29, 2011, are as follows:
-- Consolidated net revenues are expected to range from $710 million to
$730 million.
-- Operating margin is expected to be around 19.5%.
-- Diluted earnings per share are expected to be in the range of $1.02 to
$1.06.
The Company raised its outlook for the fiscal year ending January 29, 2011, which is now as follows:
-- Consolidated net revenues are expected to range from $2.44 billion to
$2.46 billion.
-- Operating margin is expected to be about 16.5%.
-- Diluted earnings per share are expected to be in the range of $3.02 to
$3.06.
Dividend
The Company also announced today that its Board of Directors has approved an increase of its quarterly cash dividend to $0.20 per share on the Company's common stock, a 25% increase over its most recent quarterly dividend. The Board of Directors has also approved a special dividend of $2.00 per share to be paid with the regular quarterly dividend. The combined dividends will be payable on December 23, 2010 to shareholders of record at the close of business on December 8, 2010.
The Company will hold a conference call at 4:30 pm (ET) on November 23, 2010 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.guess.com via the "Investor Relations" 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 30, 2010, the Company owned and operated 473 retail stores in the United States and Canada and operated 880 retail stores outside of the United States and Canada, of which 172 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.guess.com.
Except for historical information contained herein, certain matters discussed in this press release, including statements concerning the Company's global expansion strategy, future prospects and guidance for the fourth 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 and result in increasingly difficult competitive conditions; 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 and global tax rates. 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.
Maili Bergman
VP 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 30, October 31,
2010 2009
$ % $ %
--- --- --- ---
Net revenue
Product sales $580,922 94.6% $494,998 94.7%
Net royalties 32,981 5.4% 27,814 5.3%
------ --- ------ ---
613,903 100.0% 522,812 100.0%
Cost of product sales 347,506 56.6% 285,921 54.7%
------- ---- ------- ----
Gross profit 266,397 43.4% 236,891 45.3%
Selling, general and administrative
expenses 173,682 28.3% 137,917 26.4%
Accelerated pension cost
amortization - 0.0% - 0.0%
--- --- --- ---
Earnings from operations 92,715 15.1% 98,974 18.9%
Other income (expense):
Interest expense (262) (0.0%) (778) (0.1%)
Interest income 602 0.1% 277 0.1%
Other, net 5,854 0.9% (1,340) (0.3%)
----- --- ------ ------
Earnings before income taxes 98,909 16.1% 97,133 18.6%
Income taxes 28,818 4.7% 32,054 6.2%
------ --- ------ ---
Net earnings 70,091 11.4% 65,079 12.4%
Net earnings attributable to
noncontrolling interests in
subsidiaries 1,002 0.1% 1,009 0.1%
----- --- ----- ---
Net earnings attributable to
Guess?, Inc. $69,089 11.3% $64,070 12.3%
======= ==== ======= ====
Earnings per common share
attributable to common
stockholders:
Basic $0.75 $0.69
Diluted $0.75 $0.69
Weighted average common shares
outstanding attributable to common
stockholders:
Basic 90,911 90,941
Diluted 91,543 91,778
Nine Months Ended
-----------------
October 30, October 31,
2010 2009
$ % $ %
--- --- --- ---
Net revenue
Product sales $1,645,553 95.1% $1,414,489 95.2%
Net royalties 84,826 4.9% 71,947 4.8%
------ --- ------ ---
1,730,379 100.0% 1,486,436 100.0%
Cost of product sales 976,495 56.4% 840,265 56.5%
------- ---- ------- ----
Gross profit 753,884 43.6% 646,171 43.5%
Selling, general and
administrative expenses 487,722 28.3% 408,049 27.5%
Accelerated pension cost
amortization 5,819 0.3% - 0.0%
----- --- --- ---
Earnings from operations 260,343 15.0% 238,122 16.0%
Other income (expense):
Interest expense (775) (0.0%) (1,723) (0.1%)
Interest income 1,585 0.1% 1,461 0.1%
Other, net 9,026 0.5% (1,413) (0.1%)
----- --- ------ ------
Earnings before income taxes 270,179 15.6% 236,447 15.9%
Income taxes 81,055 4.7% 78,028 5.2%
------ --- ------ ---
Net earnings 189,124 10.9% 158,419 10.7%
Net earnings attributable to
noncontrolling interests in
subsidiaries 2,942 0.1% 2,247 0.2%
----- --- ----- ---
Net earnings attributable to
Guess?, Inc. $186,182 10.8% $156,172 10.5%
======== ==== ======== ====
Earnings per common share
attributable to common
stockholders:
Basic $2.01 $1.70
Diluted $2.00 $1.68
Weighted average common shares
outstanding attributable to
common stockholders:
Basic 91,474 90,765
Diluted 92,174 91,416
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended
------------------
October
October 30, 31, %
2010 2009 chg
---- ---- ---
Net revenue:
North American retail $253,721 $239,518 6%
North American wholesale 56,270 46,124 22%
Europe 216,161 168,829 28%
Asia 54,770 40,527 35%
Licensing 32,981 27,814 19%
$613,903 $522,812 17%
======== ========
Earnings (loss) from operations:
North American retail $19,326 $33,110 -42%
North American wholesale 16,697 12,245 36%
Europe 42,565 40,801 4%
Asia 8,291 5,472 52%
Licensing 30,941 24,176 28%
Corporate overhead (25,105) (16,830) 49%
Accelerated pension cost
amortization - -
--- ---
$92,715 $98,974 -6%
======= =======
Operating margins:
North American retail 7.6% 13.8%
North American wholesale 29.7% 26.5%
Europe 19.7% 24.2%
Asia 15.1% 13.5%
Licensing 93.8% 86.9%
Total Company 15.1% 18.9%
Nine Months Ended
-----------------
October 30, October 31, %
2010 2009 chg
---- ---- ---
Net revenue:
North American retail $731,296 $674,538 8%
North American wholesale 143,268 112,910 27%
Europe 625,460 524,686 19%
Asia 145,529 102,355 42%
Licensing 84,826 71,947 18%
$1,730,379 $1,486,436 16%
========== ==========
Earnings (loss) from operations:
North American retail $70,008 $81,325 -14%
North American wholesale 37,619 25,499 48%
Europe 127,396 116,233 10%
Asia 21,129 9,532 122%
Licensing 76,491 61,863 24%
Corporate overhead (66,481) (56,330) 18%
Accelerated pension cost
amortization (5,819) -
---
$260,343 $238,122 9%
======== ========
Operating margins:
North American retail 9.6% 12.1%
North American wholesale 26.3% 22.6%
Europe 20.4% 22.2%
Asia 14.5% 9.3%
Licensing 90.2% 86.0%
Total Company 15.0% 16.0%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
October 30, January 30, October 31,
2010 2010 2009
---- ---- ----
ASSETS
Cash and cash equivalents $469,020 $502,063 $344,862
Receivables, net 372,217 283,747 312,226
Inventories 346,014 253,162 269,422
Other current assets 85,473 85,191 81,976
Property and equipment, net 299,954 255,308 254,259
Other assets 193,017 151,778 147,869
Total Assets $1,765,695 $1,531,249 $1,410,614
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of borrowings
and capital lease obligations $2,264 $2,357 $2,577
Other current liabilities 421,389 340,396 301,996
Capital lease obligations 12,949 14,137 15,457
Other long-term liabilities 149,392 134,203 119,420
Redeemable and nonredeemable
noncontrolling interests 24,463 19,945 19,209
Guess?, Inc. stockholders'
equity 1,155,238 1,020,211 951,955
Total Liabilities and
Stockholders' Equity $1,765,695 $1,531,249 $1,410,614
========== ========== ==========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Nine Months Ended
-----------------
October 30, October 31,
2010 2009
---- ----
Net cash provided by operating
activities $134,308 $168,313
Net cash used in investing activities (85,523) (66,058)
Net cash used in financing activities (82,901) (57,762)
Effect of exchange rates on cash 1,073 6,251
----- -----
Net increase (decrease) in cash and
cash equivalents (33,043) 50,744
Cash and cash equivalents at the
beginning of the year 502,063 294,118
Cash and cash equivalents at the end of
the period $469,020 $344,862
======== ========
Supplemental information:
Depreciation and amortization $48,199 $47,093
Rent $157,515 $130,298
Guess?, Inc. and Subsidiaries
Retail Store Data
International Store Count
As of October 30, 2010
----------------------
Total Directly Operated
Region Stores Stores
------ ------
United States and Canada 473 473
Europe and the Middle East 472 131
Asia 351 27
Other 57 14
1,353 645
===== ===
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Nine Months Ended
-----------------
October 30, October 31,
2010 2009
---- ----
Number of stores at the beginning of
the year 432 425
Store openings 48 13
Store closures (7) (5)
Number of stores at the end of the
period 473 433
=== ===
Total store square footage at the end
of the period 2,139,000 1,992,000
========= =========
SOURCE Guess?, Inc.
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