Press release from PR Newswire
GUESS?, INC. REPORTS FIRST QUARTER RESULTS
Wednesday, May 25, 2011
GUESS?, INC. REPORTS FIRST QUARTER RESULTS16:06 EDT Wednesday, May 25, 2011First Quarter Fiscal 2012 Revenues Increased 10% to $592 Million First Quarter EPS Reached $0.46, Compared to $0.54 in Q1 Fiscal 2011 Maintains Full Year Fiscal 2012 EPS Guidance in the Range of $3.30 to $3.50LOS ANGELES, May 25, 2011 /PRNewswire/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the first quarter ended April 30, 2011.First Quarter Fiscal 2012 HighlightsRevenues increased across all operating segmentsAsian revenues increased 24%European revenues increased 12%North American retail revenues increased 5%North American wholesale revenues increased 7%Licensing revenues increased 14%Operating margin reached 12.0%, compared to 13.2% in the prior-year quarterFirst Quarter Fiscal 2012 ResultsFor the first quarter of fiscal 2012, the Company reported net earnings of $42.7 million, a 15.2% decrease compared to net earnings of $50.3 million for the first quarter of fiscal 2011. Diluted earnings per share decreased 14.8% to $0.46, compared to $0.54 for the prior-year quarter. The current quarter's earnings per share include $0.09 in net unrealized mark-to-market charges related to foreign currency contracts and balances, while the prior-year quarter's earnings per share included a $0.04 charge related to the acceleration of pension cost amortization. Paul Marciano, Chief Executive Officer, commented, "We are pleased with our first quarter performance, with all of our businesses delivering earnings within or beyond our previous expectations. We continued to expand the global presence of the Guess? brand, with each of our segments growing in the quarter. Europe and Asia continued to drive that expansion, individually delivering double digit revenue increases, which combined to represent almost two-thirds of the Company's top line growth. Our team executed well, managing costs and inventories tightly, which produced an operating margin that was two full points stronger than our previous expectations."Mr. Marciano continued, "Our first quarter results demonstrate the strength of our global brand and our ability to leverage our diverse business model to deliver solid consolidated results. We continue to develop exciting and innovative new designs that allow us to expand our global business as we introduce more customers around the world to our broad lifestyle product assortment. While we remain excited about our future, this year is not without its challenges. Our entire industry is experiencing rising commodity and input costs and there remains uncertainty in many economies around the world. Our strong management team is working on multiple initiatives to mitigate those challenges and remains focused on the fundamentals: steady growth in existing markets, expansion and the opening of new markets, infrastructure development to support our global expansion opportunities, along with solid inventory and cost control."Total net revenue for the first quarter of fiscal 2012 increased 9.8% to $592.2 million from $539.3 million in the prior-year quarter. In constant dollars, total net revenue increased 7.9%.The Company's retail stores in North America generated revenue of $247.5 million in the first quarter of fiscal 2012, a 5.0% increase from $235.8 million in the same period a year ago. Comparable store sales decreased 3.1% in US dollars and 4.1% in local currency for the first quarter of fiscal 2012, compared to the same period a year ago. The Company owned and operated 484 retail stores in the United States and Canada at the end of the first quarter of fiscal 2012 versus 433 stores a year earlier.Net revenue from the Company's Europe segment increased 12.4% to $210.2 million in the first quarter of fiscal 2012, compared to $187.0 million in the prior-year period. In local currency, net revenue increased 9.7%.Net revenue from the Company's Asia segment increased 23.7% to $60.1 million in the first quarter of fiscal 2012, from $48.6 million in the prior-year period.Net revenue from the Company's North American wholesale segment increased 6.8% to $45.6 million in the first quarter of fiscal 2012, from $42.7 million in the prior-year period.Licensing segment net revenue increased 14.1% to $28.8 million in the first quarter of fiscal 2012, from $25.3 million in the prior-year period.Operating earnings for the first quarter of fiscal 2012 declined slightly to $70.9 million (including a $1.0 million favorable currency translation impact) from $71.3 million in the prior-year period. Operating margin in the first quarter declined 120 basis points to 12.0%, compared to the prior-year quarter. The lower operating margin primarily reflects the impact of higher store occupancy expenses to support the expansion of retail businesses in Europe and North America. Product margins increased slightly compared to the prior-year quarter, reflecting the greater mix of retail business in Europe, partially offset by higher North American retail markdowns. Additionally, the current quarter operating margin was negatively impacted by a shift of European revenues out of the current quarter into the fourth quarter of fiscal 2011, while the prior-year first quarter operating margin was negatively impacted by the accelerated pension cost amortization charge. Other net expense, which primarily relates to net unrealized revaluation losses on foreign currency contracts and balances, partially offset by net unrealized gains on non-operating assets, was $10.0 million for the first quarter of fiscal 2012, compared to other net income of $3.4 million in the prior-year's quarter.The Company's effective tax rate was 29.5% for the first quarter of fiscal 2012, compared to 31.0% for the first quarter of the prior-year.OutlookThe Company updated its outlook for the fiscal year ending January 28, 2012, as follows:Consolidated net revenues are expected to range from $2.74 billion to $2.80 billion.Operating margin is expected to be between 16.5% and 17.0%.Diluted earnings per share are expected to be in the range of $3.30 to $3.50.The Company's expectations for the second quarter of fiscal 2012 ending July 30, 2011, are as follows:Consolidated net revenues are expected to range from $645 million to $660 million.Operating margin is expected to be between 15.5% and 16.0%.Diluted earnings per share are expected to be in the range of $0.77 to $0.83.The Company's second quarter earnings per share guidance includes a four cent favorable unrealized mark-to-market benefit related to its foreign currency contracts and balances based on its assumption that the Euro will end the second quarter of fiscal 2012 at a rate relatively weaker versus the US dollar than at the beginning of that same quarter.DividendThe Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.20 per share on the Company's common stock. The dividend will be payable on June 24, 2011 to shareholders of record at the close of business on June 8, 2011.The Company will hold a conference call at 4:30 pm (ET) on May 25, 2011 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 April 30, 2011, the Company owned and operated 484 retail stores in the United States and Canada and operated 937 retail stores outside of the United States and Canada, of which 202 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, currency exchange rate expectations and guidance for the second quarter and full year of fiscal 2012, 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, protect our brand image, effectively operate our various retail concepts, manage inventories, address potential increases to product costs 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 global operations, including currency fluctuations and global tax rates. In addition to these factors, the economic, technology, management, 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 BergmanVP Investor Relations(213) 765-5578Guess?, Inc. and SubsidiariesCondensed Consolidated Statements of Income(amounts in thousands, except per share data)Three Months EndedApril 30,May 1,20112010$%$%Net revenueProduct sales$ 563,39995.1%$ 514,05595.3%Net royalties28,8454.9%25,2864.7%592,244100.0%539,341100.0%Cost of product sales343,02457.9%304,09056.4%Gross profit249,22042.1%235,25143.6%Selling, general and administrative expenses178,28730.1%158,10529.3%Accelerated pension cost amortization-0.0%5,8191.1%Earnings from operations70,93312.0%71,32713.2%Other income (expense):Interest expense(405)(0.1%)(195)(0.0%)Interest income1,2950.2%3010.1%Other, net(10,002)(1.7%)3,4280.6%Earnings before income taxes61,82110.4%74,86113.9%Income taxes18,2373.0%23,2074.4%Net earnings43,5847.4%51,6549.5%Net earnings attributable to noncontrolling interests in subsidiaries9020.2%1,3190.2%Net earnings attributable to Guess?, Inc.$ 42,6827.2%$ 50,3359.3%Earnings per common share attributable to common stockholders:Basic$ 0.46$ 0.54Diluted$ 0.46$ 0.54Weighted average common shares outstanding attributable to common stockholders:Basic91,62991,902Diluted92,17192,768Guess?, Inc. and SubsidiariesConsolidated Segment Data(dollars in thousands)Three Months EndedApril 30,May 1,%20112010chgNet revenue:North American retail$ 247,457$ 235,7735%Europe210,209186,96812%Asia60,08748,58624%North American wholesale45,64642,7287%Licensing28,84525,28614%$ 592,244$ 539,34110%Earnings (loss) from operations:North American retail$ 18,630$ 24,372-24%Europe33,18134,482-4%Asia7,1017,137-1%North American wholesale11,11410,2119%Licensing25,29021,86016%Corporate overhead(24,383)(20,916)17%Accelerated pension cost amortization-(5,819)$ 70,933$ 71,327-1%Operating margins:North American retail7.5%10.3%Europe15.8%18.4%Asia11.8%14.7%North American wholesale24.3%23.9%Licensing87.7%86.5%Total Company12.0%13.2%Guess?, Inc. and SubsidiariesSelected Condensed Consolidated Balance Sheet Data(in thousands)April 30,January 29,May 1,201120112010ASSETSCash and cash equivalents$ 426,774$ 427,037$ 517,705Short-term investments15,03515,087-Receivables, net377,432358,482282,535Inventories300,713294,705245,836Other current assets78,68868,26982,079Property and equipment, net337,161313,856256,962Other assets227,085208,368169,651Total Assets$ 1,762,888$ 1,685,804$ 1,554,768LIABILITIES AND STOCKHOLDERS' EQUITYCurrent portion of capital lease obligations and borrowings$ 2,359$ 2,177$ 2,707Other current liabilities426,352428,839311,992Capital lease obligations12,83412,21812,752Other long-term liabilities164,892161,665141,136Redeemable and nonredeemable noncontrolling interests35,50026,02920,608Guess?, Inc. stockholders' equity1,120,9511,054,8761,065,573Total Liabilities and Stockholders' Equity$ 1,762,888$ 1,685,804$ 1,554,768Guess?, Inc. and SubsidiariesCondensed Consolidated Cash Flow Data(in thousands)Three Months EndedApril 30,May 1,20112010Net cash provided by operating activities$ 47,835$ 47,784Net cash used in investing activities(44,081)(23,459)Net cash used in financing activities(19,409)(6,655)Effect of exchange rates on cash15,392(2,028)Net (decrease) increase in cash and cash equivalents(263)15,642Cash and cash equivalents at the beginning of the year427,037502,063Cash and cash equivalents at the end of the period$ 426,774$ 517,705Supplemental information:Depreciation and amortization$ 19,894$ 15,751Rent60,02150,345Guess?, Inc. and SubsidiariesRetail Store DataInternational Store CountAs of April 30, 2011As of May 1, 2010TotalDirectly OwnedTotalDirectly OwnedRegionStoresStoresStoresStoresUnited States and Canada484484433433Europe and the Middle East50815441896Asia3682934428Other611955131,4216861,250570Guess?, Inc. and SubsidiariesRetail Store DataU.S. and CanadaThree Months EndedApril 30,May 1,20112010Number of stores at the beginning of the year481432Store openings64Store closures(3)(3)Number of stores at the end of the period484433Total store square footage at the end of the period2,192,0002,002,000SOURCE Guess?, Inc.