Reaffirms Fiscal Year 2009 EPS Guidance of $2.35 to $2.45 Announces $200 Million Share Repurchase Authorization Q4 EPS Increased to a Record of $0.59 Versus $0.49 Last Year Fourth Quarter Fiscal 2008 Highlights - Global revenues increased 30% to a record of $514.6 million - North American comp sales up 13.1% - Operating margin improved 70 basis points to 18.7% - Operating earnings increased 35% to $96.2 million Fiscal Year 2008 Highlights - Global revenues increased 40% to a record of $1.75 billion - Operating margin improved 130 basis points to 17.7% - Operating earnings increased 50% to $309.1 million - EPS increased 40% to $1.99 versus $1.42 last year
LOS ANGELES, Mar 19, 2008 (BUSINESS WIRE) -- Guess?, Inc. (NYSE: GES) today reported financial results for the fourth quarter and fiscal year ended February 2, 2008.Fourth Quarter Fiscal 2008 Results
For the thirteen weeks ended February 2, 2008, the Company reported record net earnings of $55.2 million, an increase of 20.3% compared to net earnings of $45.9 million for the recast fourteen week period ended February 3, 2007. Diluted earnings per share increased 20.4% to $0.59 in the current quarter versus $0.49 for the comparable period last year. There were several items that impacted the comparability of the quarterly results. Last year's quarter included an extra operating week, non-operating asset gains, a low tax rate and debt retirement costs, while the tax rate for this year's fourth quarter was relatively high. Collectively, these issues negatively impacted the quarterly earnings per share comparison by about $0.08 per share.
Paul Marciano, Chief Executive Officer, commented, "We are very pleased with our strong financial performance this quarter, especially considering the current economic environment. Once again, all of our business segments contributed to our solid revenue and earnings growth in the period. Our international businesses remained the primary drivers of this growth, with Europe and Asia representing about two-thirds of the revenue increase and half of the operating profit growth in the quarter. These results marked our 18th consecutive quarter of earnings growth."
Mr. Marciano continued, "We had another outstanding quarter which capped off yet another record-setting year in which we increased revenues by 40% and net earnings by 42%. In fiscal 2008, our international businesses accounted for more than two-thirds of our operating earnings, further solidifying our position as a true global fashion brand. This proves that the strategic investments we are making continue to yield results. Our focus remains the globalization of our brand. We continue to expand both domestically and internationally to capitalize on the strength of our brand and the power of our highly diversified business model. We are confident that we are well positioned to continue to deliver strong financial results in fiscal year 2009 and beyond."
Total net revenue for the fourth quarter of fiscal 2008 increased 29.9% to $514.6 million from $396.2 million in the prior fourth quarter period. During the quarter, the Company's retail stores in North America generated revenue of $270.9 million, a 10.4% increase from $245.3 million in the prior-year quarter. Comparable store sales for the thirteen week period ended February 2, 2008 increased 13.1% from the thirteen week period ended February 3, 2007. The Company's wholesale segment, which includes its Asian operations, generated revenue of $65.1 million during the quarter, a 53.1% increase from $42.5 million in the prior-year quarter. The Company's European segment generated revenue of $152.2 million during the quarter, an increase of 75.4% when compared to $86.8 million in the prior-year quarter. The Company's licensing segment generated revenue of $26.5 million, a 22.4% increase from $21.6 million in the prior-year period. At the end of fiscal year 2008, the Company operated 373 retail stores in the U.S. and Canada, versus 334 stores a year earlier.
Operating earnings for the fourth quarter of fiscal year 2008 increased 34.7% to $96.2 million (including a $5.4 million favorable currency translation benefit) from $71.4 million in the fourth quarter of the prior year. Operating margin in the fourth quarter improved 70 basis points to 18.7%, compared to the prior year's quarter. This margin expansion was driven by a gross margin increase of 70 basis points to 45.4% in the period.
The Company's net earnings were negatively affected by a higher effective tax rate in the current quarter. For the fourth quarter, the tax rate was 42.2%, compared to 36.5% in the prior year's quarter. The higher tax rate was due to an increase of profits in higher tax jurisdictions, the impact of tax law changes and start up activities in new markets.
Fiscal Year 2008 Results
For the fiscal year ended February 2, 2008, the Company reported record net earnings of $186.5 million, an increase of 42.2% compared to net earnings of $131.2 million for the recast year ended February 3, 2007. Diluted earnings per share increased 40.1% to $1.99 in fiscal year 2008 versus $1.42 in the prior year.
Total net revenue for fiscal year 2008 increased 39.7% to $1.75 billion from $1.25 billion in the prior year. The Company's retail stores in North America generated revenue of $862.4 million for fiscal year 2008, an increase of 16.4% from $741.1 million in the prior year. Comparable store sales for the 52 week period ended February 2, 2008 increased 14.6% from the 52 week period ended February 3, 2007. Net revenue from the Company's wholesale segment, which includes its Asian operations, increased 69.3% in fiscal year 2008 to $258.4 million from $152.6 million in the prior year. Net revenue from the Company's European segment increased 84.5% to $538.4 million in fiscal year 2008, compared to $291.8 million in the prior year. Licensing segment net revenue increased 35.1% to $90.7 million in fiscal year 2008, compared to $67.1 million in the prior year.
Operating earnings for fiscal year 2008 increased 50.4% to $309.1 million (including a $14.7 million favorable currency translation benefit) from $205.5 million in the prior year. Operating margin for fiscal year 2008 improved by 130 basis points to 17.7%. This margin expansion was driven by a gross margin increase of 120 basis points to 45.3% and a decrease in the SG&A expense rate of 10 basis points to 27.6%. The Company's effective tax rate was 39.8% for fiscal year 2008 versus 37.2% in the prior year.
Outlook
For the first quarter ending May 3, 2008, the Company's expectations are as follows:
-- Consolidated net revenues are expected to range from $445 million to $460 million.
-- Operating margin is expected to be about 15.0%.
-- Diluted earnings per share are expected to be in the range of $0.44 to $0.46.
For the fiscal year ending January 31, 2009, the Company's expectations are now as follows:
-- Consolidated net revenues are expected to range from $1.97 billion to $2.05 billion.
-- Operating margin is expected to be about 17.7%.
-- Diluted earnings per share are expected to be in the range of $2.35 to $2.45.
Share Repurchase
The Company announced today that its Board of Directors has authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $200 million of its common stock. Repurchases may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program and the program may be discontinued at any time, without prior notice.
Dividend
The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.08 per share on the Company's common stock. The dividend will be payable on April 18, 2008 to shareholders of record at the close of business on April 2, 2008.
The Company will hold a conference call at 4:30 pm (ET) on March 19, 2008 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 February 2, 2008, the Company operated 373 retail stores in the United States and Canada and 579 free standing retail stores outside of North America, of which 60 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 future prospects and guidance for the first quarter and full year of fiscal year 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 our ability to, among other things, anticipate consumer preferences, effectively operate our various retail concepts, effectively manage inventories, successfully execute our strategies, including our supply chain and international growth strategies, currency fluctuations and domestic and international general economic conditions and consumer confidence. 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.
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three Months Ended
-----------------------------------
February 2, February 3,
2008 2007
$ % $ %
----------------- -----------------
Net revenue
Product sales $488,130 94.9% $374,592 94.5%
Net royalties 26,471 5.1% 21,624 5.5%
----------------- -----------------
514,601 100.0% 396,216 100.0%
Cost of product sales 281,078 54.6% 219,179 55.3%
----------------- -----------------
Gross profit 233,523 45.4% 177,037 44.7%
Selling, general and
administrative expenses 137,323 26.7% 105,608 26.7%
----------------- -----------------
Earnings from operations 96,200 18.7% 71,429 18.0%
Other (income) expense:
Interest expense 1,243 0.2% 2,886 0.7%
Interest income (2,162) (0.4%) (1,748) (0.5%)
Other, net 2,104 0.4% (1,890) (0.5%)
----------------- -----------------
Earnings before income taxes and
minority interests 95,015 18.5% 72,181 18.2%
Income taxes 40,052 7.8% 26,335 6.6%
Minority interest (226) (0.0%) (19) ---
----------------- -----------------
Net earnings $ 55,189 10.7% $ 45,865 11.6%
================= =================
Net earnings per share:
Basic $ 0.60 $ 0.50
Diluted $ 0.59 $ 0.49
Weighted number of shares
outstanding:
Basic 92,654 91,506
Diluted 93,943 92,892
Twelve Months Ended
---------------------------------------
February 2, February 3,
2008 2007
$ % $ %
------------------- -------------------
Net revenue
Product sales $1,659,184 94.8% $1,185,528 94.6%
Net royalties 90,732 5.2% 67,136 5.4%
------------------- -------------------
1,749,916 100.0% 1,252,664 100.0%
Cost of product sales 957,147 54.7% 700,155 55.9%
------------------- -------------------
Gross profit 792,769 45.3% 552,509 44.1%
Selling, general and
administrative expenses 483,630 27.6% 346,990 27.7%
------------------- -------------------
Earnings from operations 309,139 17.7% 205,519 16.4%
Other (income) expense:
Interest expense 3,442 0.2% 7,662 0.6%
Interest income (7,546) (0.4%) (6,239) (0.5%)
Other, net 1,780 0.1% (4,660) (0.4%)
------------------- -------------------
Earnings before income taxes
and minority interests 311,463 17.8% 208,756 16.7%
Income taxes 124,099 7.1% 77,615 6.2%
Minority interest 892 (0.0%) (31) ---
------------------- -------------------
Net earnings $ 186,472 10.7% $ 131,172 10.5%
=================== ===================
Net earnings per share:
Basic $ 2.02 $ 1.44
Diluted $ 1.99 $ 1.42
Weighted number of shares
outstanding:
Basic 92,307 90,786
Diluted 93,695 92,222
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended Twelve Months Ended
--------------------------- ---------------------------
February 2, February 3, % February 2, February 3, %
2008 2007 chg 2008 2007 chg
----------- ----------- --- ----------- ----------- ---
Net revenue:
Retail
operations $ 270,872 $ 245,314 10% $ 862,381 $ 741,104 16%
Wholesale
operations 65,070 42,500 53% 258,445 152,623 69%
European
operations 152,188 86,778 75% 538,358 291,801 84%
Licensing
operations 26,471 21,624 22% 90,732 67,136 35%
----------- ----------- ----------- -----------
$ 514,601 $ 396,216 30% $1,749,916 $1,252,664 40%
=========== =========== =========== ===========
Earnings
(loss) from
operations:
Retail
operations $ 49,430 $ 44,109 12% $ 128,523 $ 105,524 22%
Wholesale
operations 11,739 7,660 53% 49,894 25,166 98%
European
operations 27,879 16,914 65% 120,818 73,180 65%
Licensing
operations 23,508 20,421 15% 77,941 58,656 33%
Corporate
overhead (16,356) (17,675) -7% (68,037) (57,007) 19%
----------- ----------- ----------- -----------
$ 96,200 $ 71,429 35% $ 309,139 $ 205,519 50%
=========== =========== =========== ===========
Operating
margins:
Retail
operations 18.2% 18.0% 14.9% 14.2%
Wholesale
operations 18.0% 18.0% 19.3% 16.5%
European
operations 18.3% 19.5% 22.4% 25.1%
Licensing
operations 88.8% 94.4% 85.9% 87.4%
Total
Company 18.7% 18.0% 17.7% 16.4%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(dollars in thousands)
February 2, February 3,
2008 2007
----------- -----------
ASSETS
Cash and cash equivalents $ 275,595 $ 207,617
Receivables, net 254,400 142,659
Inventories, net 232,159 173,668
Other current assets 52,585 39,523
Property and equipment, net 229,917 162,555
Other assets 141,572 117,300
----------- -----------
Total Assets $ 1,186,228 $ 843,322
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of borrowings and capital lease
obligations $ 35,254 $ 20,804
Other current liabilities 353,037 258,725
Borrowings and capital lease obligations 18,724 17,336
Other long-term liabilities 116,250 103,126
Minority interest 5,989 4,607
Stockholders' equity 656,974 438,724
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,186,228 $ 843,322
=========== ===========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(dollars in thousands)
Twelve Months Ended
-----------------------
February 2, February 3,
2008 2007
----------- -----------
Net cash provided by operating activities $ 175,460 $ 141,738
Net cash used in investing activities (111,858) (75,708)
Net cash used in financing activities (86) (25,942)
Effect of exchange rates on cash 4,462 335
----------- -----------
Net increase in cash and cash equivalents 67,978 40,423
Cash and cash equivalents at the beginning of
the year 207,617 167,194
----------- -----------
Cash and cash equivalents at the end of the
period $ 275,595 $ 207,617
=========== ===========
Supplemental information:
Depreciation and amortization $ 50,579 $ 39,599
Rent 122,305 85,368
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Twelve Months Ended
-----------------------
February 2, February 3,
2008 2007
----------- -----------
Number of stores at the beginning of the year 334 311
Store openings 49 33
Store closures (10) (10)
----------- -----------
Number of stores at the end of the period 373 334
=========== ===========
Total store square footage at the end of the
period 1,759,000 1,610,000
=========== ===========
SOURCE: Guess?, Inc.
Guess?, Inc.
Carlos Alberini, President & Chief Operating Officer
(213) 765-3582
or
Dennis R. Secor, SVP & Chief Financial Officer
(213) 765-3289
or
ICR, Inc.
Joseph Teklits
(203) 682-8258