Press release from PR Newswire
Guess?, Inc. Reports First Quarter Results
Tuesday, May 22, 2012
Guess?, Inc. Reports First Quarter Results16:05 EDT Tuesday, May 22, 2012Q1 Fiscal 2013 EPS Reached $0.30, Compared to $0.46 in Q1 Fiscal 2012 Q1 Revenues Decreased 2% to $579 Million; Increased Slightly in Constant Dollars Provides Q2 EPS Guidance in the Range of $0.48 to $0.52 Maintains Full Year Fiscal 2013 EPS Guidance in the Range of $2.50 to $2.65LOS ANGELES, May 22, 2012 /PRNewswire/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the first quarter ended April 28, 2012.First Quarter Fiscal 2013 HighlightsNorth American Retail revenues increased 2%; retail comp sales declined 5.5% Asian revenues increased 8% European revenues decreased 10% in U.S. dollars; declined 5% in local currency Operating earnings decreased 45% and operating margin declined 520 basis points to 6.8%First Quarter Fiscal 2013 ResultsFor the first quarter of fiscal 2013, the Company reported net earnings of $26.6 million, a 37.6% decrease compared to net earnings of $42.7 million for the first quarter of fiscal 2012. Diluted earnings per share decreased 34.8% to $0.30, compared to $0.46 for the prior-year quarter. The prior year quarter's earnings per share included $0.08 in net non-operating charges, primarily unrealized mark-to-market charges related to foreign currency contracts and balances.Paul Marciano, Chief Executive Officer, commented, "We are pleased to deliver first quarter financial results that exceeded both our top and bottom line expectations, even as economic conditions remained challenging in many markets. We continued to focus our efforts on growing in newer international markets, and we succeeded, expanding in key markets such as China, Germany and Russia. While we did face economic headwinds in southern Europe, our brand remains strong there and our business is stable. Our global licensing business outperformed expectations, even as our licensees encountered many of those same economic challenges."Mr. Marciano continued, "We're off to a very encouraging start this year ? a milestone year for Guess? as we celebrate our 30th anniversary. We've launched great new marketing campaigns that invoke the rich tradition of Guess? and reach consumers through both traditional and social media. We are developing innovative product designs to support our customers' lifestyle and reinforce our fashion authority. We intend to leverage the strength of our global lifestyle brand and expand in underdeveloped markets and newer concepts. As always, we will manage our business prudently from our position of financial strength and, above all, protect our most valuable asset, the Guess? brand."Total net revenue for the first quarter of fiscal 2013 decreased 2.2% to $579.3 million from $592.2 million in the prior-year quarter. In constant dollars, total net revenue increased slightly.The Company's retail stores in North America generated revenue of $251.8 million in the first quarter of fiscal 2013, a 1.8% increase from $247.5 million in the same period a year ago. Comparable store sales decreased 5.5% in U.S. dollars and 5.1% in local currency for the first quarter of fiscal 2013, compared to the same period a year ago. The Company directly operated 503 retail stores in the United States and Canada at the end of the first quarter of fiscal 2013 versus 484 stores a year earlier. Net revenue from the Company's Europe segment decreased 9.7% to $189.8 million in the first quarter of fiscal 2013, compared to $210.2 million in the prior-year period. In local currency, net revenue decreased 4.6%. Net revenue from the Company's Asia segment increased 7.9% to $64.8 million in the first quarter of fiscal 2013, from $60.1 million in the prior-year period. Net revenue from the Company's North American Wholesale segment decreased 3.8% to $43.9 million in the first quarter of fiscal 2013, from $45.6 million in the prior-year period. Licensing segment net revenue increased to $28.9 million in the first quarter of fiscal 2013, from $28.8 million in the prior-year period.Operating earnings for the first quarter of fiscal 2013 declined 44.8% to $39.1 million (including a $0.9 million unfavorable currency translation impact) from $70.9 million in the prior-year period. Operating margin in the first quarter declined 520 basis points to 6.8%, compared to the prior-year quarter. The lower operating margin primarily reflects the impact of higher professional fees, higher selling and distribution expenses and increased investments in advertising and marketing, along with the impact of negative same stores sales on the Company's fixed cost structure. Product margins increased slightly compared to the prior-year quarter, reflecting markdown improvements in North American Retail, along with the greater mix of retail business in Asia. Other net income, which primarily relates to net unrealized revaluation gains on non-operating assets, partially offset by net unrealized mark-to-market losses on foreign currency contracts and balances, was $0.6 million for the first quarter of fiscal 2013. This compares to other net expense of $10.0 million for the first quarter of fiscal 2012.The Company's effective tax rate was 32.0% for the first quarter of fiscal 2013, compared to 29.5% for the first quarter of the prior-year.OutlookThe Company updated its outlook for the fiscal year ending February 2, 2013, which is now as follows:Consolidated net revenues are expected to range from $2.70 billion to $2.74 billion. Operating margin is expected to be between 12.5% and 13.0%. Diluted earnings per share are expected to be in the range of $2.50 to $2.65.The Company's expectations for the second quarter of fiscal 2013 ending July 28, 2012, are as follows:Consolidated net revenues are expected to range from $625 million to $635 million. Operating margin is expected to be between 10.0% and 10.5%. Diluted earnings per share are expected to be in the range of $0.48 to $0.52.The Company's fiscal year 2013 will include 53 weeks, while fiscal 2012 included 52 weeks. The Company's outlook for fiscal 2013 assumes that currently prevailing exchange rates will continue throughout the year.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 22, 2012 to shareholders of record at the close of business on June 6, 2012.Presentation of Non-GAAP InformationThe financial information presented in this release for the first quarter ended April 28, 2012 includes both GAAP and non-GAAP measures. The Company believes that these "non-GAAP" financial measures related to constant currency financial information are useful as an additional means for investors to evaluate the Company's operating results when reviewed in conjunction with the Company's GAAP financial statements. The non-GAAP measures are provided in addition to, and not as alternatives for, the Company's reported GAAP results.Foreign currency exchange rate fluctuations affect the amount reported from translating the Company's foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results under GAAP. The Company provides constant currency information to help investors assess how our businesses performed excluding the effects of changes in foreign currency translation rates. To calculate revenues and earnings from operations on a constant currency basis, operating results for the current year period for entities reporting in currencies other than U.S. dollars are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.The Company will hold a conference call at 4:30 pm (ET) on May 22, 2012 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. Guess? products are distributed through branded Guess? stores as well as better department and specialty stores around the world. As of April 28, 2012, the Company directly operated 503 retail stores in the United States and Canada and 264 retail stores in Europe, Asia and Latin America. The Company's licensees and distributors operated an additional 828 retail stores outside of the United States and Canada. 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 short and long-term future prospects and guidance for the second quarter and full year of fiscal 2013, 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, effectively operate our various retail concepts, effectively manage inventories and successfully execute our strategies, including our supply chain and international growth strategies; unexpected obligations arising from litigation and other regulatory proceedings, including tax proceedings, and changes in economic, political, social and other conditions affecting our foreign operations, including currency fluctuations, global tax rates and the current European economic crisis. In addition to these factors, the economic, technological, managerial, 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) 765-5578Source: Guess?, Inc. Guess?, Inc. and SubsidiariesConsolidated Statements of Income(amounts in thousands, except per share data)Three Months EndedApril 28,April 30,20122011$%$%Product sales$ 550,36695.0%$ 563,39995.1%Net royalties28,9005.0%28,8454.9%Net revenue579,266100.0%592,244100.0%Cost of product sales344,19059.4%344,21458.1%Gross profit235,07640.6%248,03041.9%Selling, general and administrative expenses195,93533.8%177,09729.9%Earnings from operations39,1416.8%70,93312.0%Other income (expense): Interest expense(384)(0.1%)(405)(0.1%) Interest income6940.1%1,2950.2% Other, net5680.1%(10,002)(1.7%)Earnings before income taxes40,0196.9%61,82110.4%Income taxes12,8062.2%18,2373.0%Net earnings27,2134.7%43,5847.4%Net earnings attributable to noncontrolling interests in subsidiaries5670.1%9020.2%Net earnings attributable to Guess?, Inc.$ 26,6464.6%$ 42,6827.2%Net earnings per common share attributable to common stockholders: Basic$ 0.30$ 0.46 Diluted$ 0.30$ 0.46Weighted average common shares outstanding attributable to common stockholders: Basic89,19091,629 Diluted89,51092,171 Guess?, Inc. and SubsidiariesConsolidated Segment Data(amounts in thousands)Three Months EndedApril 28,April 30,%20122011chgNet revenue:North American Retail$ 251,798$ 247,4572%Europe189,815210,209-10%Asia64,83560,0878%North American Wholesale43,91845,646-4%Licensing28,90028,8450%$ 579,266$ 592,244-2%Earnings (loss) from operations:North American Retail$ 16,990$ 18,630-9%Europe12,48133,181-62%Asia5,8757,101-17%North American Wholesale9,34611,114-16%Licensing24,58625,290-3%Corporate Overhead(30,137)(24,383)24%$ 39,141$ 70,933-45%Operating margins:North American Retail6.7%7.5%Europe6.6%15.8%Asia9.1%11.8%North American Wholesale21.3%24.3%Licensing 85.1%87.7%Total Company6.8%12.0% Guess?, Inc. and SubsidiariesSelected Condensed Consolidated Balance Sheet Data(amounts in thousands)April 28,January 28, April 30,201220122011ASSETSCash and cash equivalents$ 480,353$ 491,805$ 426,774Short-term investments9,6184,06015,035Receivables, net335,517340,602377,432Inventories334,235328,602300,713Other current assets81,78896,41378,688Property and equipment, net354,394348,885337,161Other assets243,839234,108227,085Total Assets$ 1,839,744$ 1,844,475$ 1,762,888LIABILITIES AND STOCKHOLDERS' EQUITYCurrent portion of borrowings and capital lease obligations$ 1,967$ 2,030$ 2,359Other current liabilities387,207418,006426,352Capital lease obligations9,80710,20612,834Other long-term liabilities221,978211,675164,892Redeemable and nonredeemable noncontrolling interests31,46426,92835,500Guess?, Inc. stockholders' equity1,187,3211,175,6301,120,951Total Liabilities and Stockholders' Equity$ 1,839,744$ 1,844,475$ 1,762,888 Guess?, Inc. and SubsidiariesSelected Condensed Consolidated Cash Flow Data(in thousands)Three Months EndedApril 28,April 30,20122011Net cash provided by operating activities$ 36,653$ 47,835Net cash used in investing activities(31,384)(44,081)Net cash used in financing activities(17,482)(19,409)Effect of exchange rates on cash76115,392Net decrease in cash and cash equivalents(11,452)(263)Cash and cash equivalents at the beginning of the year491,805427,037Cash and cash equivalents at the end of the year$ 480,353$ 426,774Supplemental information:Depreciation and amortization$ 20,721$ 19,894Rent$ 64,262$ 60,021 Guess?, Inc. and SubsidiariesRetail Store DataInternational Store CountAs of April 28, 2012As of April 30, 2011TotalDirectly OperatedTotalDirectly OperatedRegionStoresStoresStoresStoresUnited States and Canada503503484484Europe and the Middle East577191508154Asia4424836829Central and South America732561191,5957671,421686 Guess?, Inc. and SubsidiariesRetail Store DataU.S. and CanadaThree Months EndedApril 28,April 30,20122011Number of stores at the beginning of the year504481Store openings66Store closures(7)(3)Number of stores at the end of the period503484Total store square footage at the end of the period2,319,0002,192,000 SOURCE Guess?, Inc.