REPORTS Q3 EPS GROWTH OF 11% TO A RECORD OF $0.69
UPDATES FISCAL 2009 EPS GUIDANCE TO A RANGE OF $2.27 TO $2.32
Third Quarter Highlights
- Global revenues increased 13% to a record of $528 million
- European revenues up 17%
- North American retail revenues up 12%; comp sales down 0.8%
- Licensing revenues up 25%
- Net earnings increased 10% to a record of $64 million
LOS ANGELES, Dec. 4 /PRNewswire-FirstCall/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the third quarter of its 2009 fiscal year, which ended November 1, 2008.
Third Quarter Fiscal 2009 Results
For the third quarter of fiscal 2009, the Company reported record net earnings of $64.0 million, an increase of 9.9% compared to net earnings of $58.3 million for the quarter ended November 3, 2007. Diluted earnings per share increased 11.3% to $0.69 in the current quarter versus $0.62 in the prior year quarter.
Paul Marciano, Chief Executive Officer, commented, "We are pleased with our third quarter financial performance considering the dramatic downturn in the global economy. Our performance, once again, demonstrated the power of our global business model, as each of our business segments contributed to our 13% revenue growth. Our North American business was strong at the beginning of the quarter, though business softened toward the end of the period. Internationally, we continued our expansion with solid revenue increases in growing markets like Europe and China and our licensing business extended its recent trend of double digit revenue growth. We controlled our inventories and managed expenses effectively and achieved a 10% increase in earnings -- representing our 21st consecutive quarter of earnings growth."
Mr. Marciano continued, "We remain committed more than ever to our long term strategies for growth and profitability. We do expect that the current market changes in the global economy will continue for some time. We will run our business proactively to adapt to the existing economic climate, managing our expenses and inventories tightly and deploying our capital carefully. We have a strong global brand, an outstanding product assortment, a solid capital structure and a superior management team. These position us well to manage through these challenging times effectively and emerge from this environment even stronger."
Total net revenue for the third quarter of fiscal 2009 increased 12.5% to $527.9 million from $469.1 million in the prior-year quarter. The Company's retail stores in North America generated revenues of $235.1 million in the third quarter of fiscal 2009, an 11.7% increase from $210.4 million in the same period a year ago. Comparable store sales decreased 0.8% for the third quarter of fiscal 2009, compared to the same period a year ago. The Company operated 422 retail stores in the U.S. and Canada at the end of the third quarter of fiscal 2009 versus 365 stores a year earlier.
Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 2.4% to $78.8 million in the third quarter of fiscal 2009, from $76.9 million in the prior-year period.
Net revenue from the Company's European segment increased 16.8% to $186.2 million in the third quarter of fiscal 2009, compared to $159.4 million in the prior-year period.
Licensing segment net revenue increased 24.7% to $27.9 million in the third quarter of fiscal 2009, from $22.4 million in the prior-year period.
Operating earnings for the third quarter of fiscal 2009 increased 3.9% to $99.4 million (including a $1.5 million favorable currency translation impact) from $95.6 million in the prior-year period. Operating margin in the third quarter decreased 160 basis points to 18.8%, compared to the prior year's quarter. This margin decline resulted from lower gross margins in North America, the impact of negative same store sales growth on North American retail operating expenses and higher expenses in Europe due to infrastructure investments and to support new businesses. These were partially offset by higher European product margins, a higher mix of European and licensing businesses and lower corporate overhead expenses.
The Company's effective tax rate for the third quarter of fiscal 2009 was 33.1%, down from 38.8% for the third quarter of the prior year.
Nine-Month Period Results
For the nine months ended November 1, 2008, the Company reported net earnings of $165.7 million, an increase of 26.2% compared to net earnings of $131.3 million for the nine months ended November 3, 2007. Diluted earnings per share increased 26.4% to $1.77 per share in the first nine months of the current 2009 fiscal year versus $1.40 per share in the comparable nine-month period last year.
Total net revenue for the first nine months of fiscal 2009 increased 24.0% to $1,532.3 million from $1,235.3 million in the prior-year period. The Company's retail stores in North America generated revenue of $689.4 million in the first nine months of fiscal 2009, a 16.5% increase from $591.5 million in the same period a year ago. Comparable store sales increased 4.6% for the nine months ended November 1, 2008, compared to the nine months ended November 3, 2007. Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 17.0% to $226.3 million in the first nine months of fiscal 2009, from $193.4 million in the prior-year period. Net revenue from the Company's European segment increased 39.6% to $539.1 million in the first nine months of fiscal 2009, compared to $386.2 million in the prior-year period. Licensing segment net revenue increased 20.8% to $77.6 million in the first nine months of fiscal 2009, from $64.3 million in the prior-year period.
Operating earnings for the first nine months of fiscal 2009 increased 22.2% to $260.3 million (including a $12.8 million favorable currency translation benefit) from $212.9 million in the prior-year period. Operating margin in the first nine months of fiscal 2009 remained essentially flat at 17.0% when compared to the prior-year period.
Outlook
The Company provided the following expectations for its fourth quarter ending January 31, 2009:
- Consolidated net revenues are expected to range from $500 million to $540 million.
- Operating margin is expected to be about 14%.
- Diluted earnings per share are expected to be in the range of $0.50 to $0.55.
The Company updated its outlook for the fiscal year ending January 31, 2009, which is now as follows:
- Consolidated net revenues are expected to range from $2.03 billion to $2.07 billion.
- Operating margin is expected to be about 16%.
- Diluted earnings per share are expected to be in the range of $2.27 to $2.32.
Dividend
The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.10 per share on the Company's common stock. This dividend will be payable on January 2, 2009 to shareholders of record at the close of business on December 17, 2008.
The Company will hold a conference call at 4:30 pm (ET) on December 4, 2008 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at http://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 November 1, 2008, the Company operated 422 retail stores in the United States and Canada and 651 retail stores outside of North America, of which 84 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 http://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 2009, 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 leading to a reduction in 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 and other factors 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 Operations
(dollars in thousands, except per share data)
Three Months Ended
November 1, November 3,
2008 2007
$ % $ %
Net revenue
Product sales $499,994 94.7% $446,672 95.2%
Net royalties 27,934 5.3% 22,407 4.8%
527,928 100.0% 469,079 100.0%
Cost of product sales 286,116 54.2% 250,598 53.4%
Gross profit 241,812 45.8% 218,481 46.6%
Selling, general and administrative
expenses 142,432 27.0% 122,837 26.2%
Earnings from operations 99,380 18.8% 95,644 20.4%
Other (income) expense:
Interest expense 1,706 0.3% 888 0.2%
Interest income (2,000) (0.4%) (1,636) (0.4%)
Other, net 3,717 0.7% (685) (0.1%)
Earnings before income taxes and
minority interests 95,957 18.2% 97,077 20.7%
Income taxes 31,721 6.0% 37,648 8.1%
Minority interest 219 0.1% 1,155 0.2%
Net earnings $64,017 12.1% $58,274 12.4%
Net earnings per share:
Basic $0.69 $0.63
Diluted $0.69 $0.62
Weighted number of shares outstanding:
Basic 92,438 92,516
Diluted 93,309 93,760
Nine Months Ended
November 1, November 3,
2008 2007
$ % $ %
Net revenue
Product sales $1,454,685 94.9% $1,171,054 94.8%
Net royalties 77,635 5.1% 64,261 5.2%
1,532,320 100.0% 1,235,315 100.0%
Cost of product sales 837,114 54.6% 676,069 54.7%
Gross profit 695,206 45.4% 559,246 45.3%
Selling, general and
administrative expenses 434,891 28.4% 346,307 28.1%
Earnings from operations 260,315 17.0% 212,939 17.2%
Other (income) expense:
Interest expense 3,530 0.2% 2,199 0.2%
Interest income (5,086) (0.3%) (5,384) (0.5%)
Other, net 5,349 0.4% (324) ---
Earnings before income taxes and
minority interests 256,522 16.7% 216,448 17.5%
Income taxes 89,526 5.8% 84,047 6.8%
Minority interest 1,346 0.1% 1,118 0.1%
Net earnings $165,650 10.8% $131,283 10.6%
Net earnings per share:
Basic $1.79 $1.42
Diluted $1.77 $1.40
Weighted number of shares outstanding:
Basic 92,799 92,194
Diluted 93,743 93,515
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended
November 1, November 3, %
2008 2007 chg
Net revenue:
Retail operations $235,074 $210,407 12%
Wholesale operations 78,760 76,901 2%
European operations 186,160 159,363 17%
Licensing operations 27,934 22,408 25%
$527,928 $469,079 13%
Earnings (loss) from operations:
Retail operations $27,378 $31,440 -13%
Wholesale operations 13,839 17,261 -20%
European operations 49,541 45,856 8%
Licensing operations 24,075 17,969 34%
Corporate overhead (15,453) (16,882) -8%
$99,380 $95,644 4%
Operating margins:
Retail operations 11.6% 14.9%
Wholesale operations 17.6% 22.4%
European operations 26.6% 28.8%
Licensing operations 86.2% 80.2%
Total Company 18.8% 20.4%
Nine Months Ended
November 1, November 3, %
2008 2007 chg
Net revenue:
Retail operations $689,371 $591,509 17%
Wholesale operations 226,257 193,375 17%
European operations 539,057 386,170 40%
Licensing operations 77,635 64,261 21%
$1,532,320 $1,235,315 24%
Earnings (loss) from operations:
Retail operations $80,358 $79,093 2%
Wholesale operations 37,184 38,155 -3%
European operations 129,628 92,939 39%
Licensing operations 66,852 54,433 23%
Corporate overhead (53,707) (51,681) 4%
$260,315 $212,939 22%
Operating margins:
Retail operations 11.7% 13.4%
Wholesale operations 16.4% 19.7%
European operations 24.0% 24.1%
Licensing operations 86.1% 84.7%
Total Company 17.0% 17.2%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
November 1, February 2, November 3,
2008 2008 2007
ASSETS
Cash and cash equivalents $236,601 $275,595 $191,878
Receivables, net 299,653 254,400 296,617
Inventories, net 252,973 232,159 222,956
Other current assets 67,856 52,585 46,141
Property and equipment, net 243,704 229,917 219,984
Other assets 145,893 141,572 144,586
Total Assets $1,246,680 $1,186,228 $1,122,162
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of borrowings and
capital lease obligations $45,555 $35,254 $43,252
Other current liabilities 305,404 353,037 345,132
Borrowing and capital lease
obligations 14,494 18,724 18,152
Other long-term liabilities 116,350 116,250 108,574
Minority interest 8,996 5,989 6,215
Stockholders' equity 755,881 656,974 600,837
Total Liabilities and Stockholders'
Equity $1,246,680 $1,186,228 $1,122,162
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Nine Months Ended
November 1, November 3,
2008 2007
Net cash provided by operating activities $93,447 $54,954
Net cash used in investing activities (82,435) (97,687)
Net cash (used in) provided by
financing activities (41,235) 22,240
Effect of exchange rates on cash (8,771) 4,754
Net decrease in cash and cash equivalents (38,994) (15,739)
Cash and cash equivalents at the
beginning of the year 275,595 207,617
Cash and cash equivalents at the end
of the period $236,601 $191,878
Supplemental information:
Depreciation and amortization $45,015 $36,835
Rent 117,966 87,956
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Nine Months Ended
November 1, November 3,
2008 2007
Number of stores at the beginning of the year 373 334
Store openings 50 39
Store closures (1) (8)
Number of stores at the end of the period 422 365
Total store square footage at the end
of the period 1,944,000 1,719,000
SOURCE: Guess?, Inc.
CONTACT: Investor Relations, Guess?, Inc., +1-213-765-5578
Web site: http://www.guess.com
(GES)