EPS of $0.46 Versus $0.27 Last Year, a 70% Increase
- October Comp Sales Up 12.3% -
Third Quarter Highlights
- Net revenues increased 34% to $265.6 million; comparable store sales
increased 8.9%
- Gross margin increased 510 basis points to 43.1%
- Earnings from operations increased $14.0 million to $35.5 million,
reflecting a 13.4% operating margin
- Net earnings increased 75% to $20.7 million
LOS ANGELES, Nov. 2 /PRNewswire-FirstCall/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the third quarter ended October 1, 2005.
Third Quarter Results
For the third quarter ended October 1, 2005, the Company reported that net earnings increased by 74.9% to $20.7 million compared to net earnings of $11.8 million for the quarter ended September 25, 2004. Diluted earnings per share increased 70.4% to $0.46 per share in the current quarter versus $0.27 per share in the third quarter last year. Reported earnings for the period included a special performance-based compensation expense of $4.6 million, or $2.7 million after tax, or $0.06 per diluted share, related to the performance and contributions of the licensing business to the Company's operations. There was no corresponding expense in the comparable prior year period.
Paul Marciano, Co-Chairman and Co-CEO, commented, "We are very pleased with our record revenues and earnings performance in the third quarter. We believe that the significant revenue growth reflects a very positive customer response to our product assortment and mix, and the success of our European business. Our inventories continue to be clean and this has contributed to substantially increased margins in our retail and wholesale segments. The strong performance of our European business underscores the reach of the Guess? brand. As we look to our important fourth quarter, the October comp store sales increase of 12.3% shows good momentum in our core business in North America, and we remain confident about our product assortment. Our cash flow continues to increase and should provide the foundation to support the future growth of our global brand."
Total net revenue for the third quarter of 2005 increased 34.3% to $265.6 million from $197.8 million in the third quarter of 2004. The Company's retail stores in the U.S. and Canada generated revenue of $156.3 million in the 2005 third quarter, an 18.3% increase from $132.1 million, as reported in the prior year period. Comparable store sales increased 8.9% during the third quarter of 2005 versus the prior year period. Net revenue from the Company's wholesale segment decreased 9.3% to $31.0 million in the third quarter of 2005 from $34.1 million in the prior-year period. Net revenue from the Company's European operations segment increased 272.1% to $64.4 million in the third quarter of 2005, compared to $17.3 million in the prior year period, following the acquisition of the Company's European jeanswear licensee on January 3, 2005. Licensing segment net revenue decreased 2.7% to $13.9 million in the third quarter of 2005 from $14.3 million in the prior year period. The Company operated 305 retail stores in the U.S. and Canada at third quarter-end 2005 versus 269 stores a year earlier.
Nine Month Results
For the nine months ended October 1, 2005, the Company reported that net earnings increased 124.4% to $33.0 million compared to net earnings of $14.7 million for the nine months ended September 25, 2004. Diluted earnings per share increased 124.2% to $0.74 per share in the current nine-month period versus $0.33 per share in the comparable period last year. Reported earnings for the nine month period included a special performance-based compensation expense of $4.6 million, or $2.7 million after tax, or $0.06 per diluted share, related to the performance and contributions of the licensing business to the Company's operations. There was no corresponding expense in the comparable prior year period. The nine months ended October 1, 2005 had 274 days compared to 269 days in the nine months ended September 25, 2004.
Total net revenue increased 30.5% to $659.4 million in the 2005 nine-month period from $505.3 million in the prior year period. The Company's retail stores in the U.S. and Canada generated revenue of $405.7 million for the first nine months of 2005, an increase of 17.0% from $346.9 million for the prior year period. Comparable store sales increased 6.0% during the first nine months of 2005. Net revenue from the Company's wholesale segment in the first nine months of 2005 increased 0.8% to $88.1 million from $87.4 million in the first nine months of 2004. Net revenue from the Company's European operations segment increased 262.5% to $131.0 million in the first nine months of 2005, compared to $36.2 million in the prior year period, following the acquisition of the Company's European jeanswear licensee on January 3, 2005. Licensing segment net revenue was $34.6 million in the first nine months of 2005, a 0.5% decrease from $34.8 million for the same prior year period.
October 2005 Retail Sales
The Company also reported today retail sales for its stores in the U.S. and Canada for fiscal October 2005. Total October retail sales for the four weeks ended October 29, 2005 were $45.5 million, an increase of 22.4% from sales of $37.2 million for the four weeks ended October 30, 2004. Comparable store sales for the October period increased 12.3% compared to the year-ago period.
The Company will hold a conference call at 4:30 pm (ET) on November 2, 2005 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's Info" link from the "Guess?, Inc." section of the site. The webcast will be archived on the website for 30 days.
Guess?, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, accessories and related consumer products. At October 1, 2005, the Company operated 305 retail stores in the United States and Canada. 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 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 and other future events to differ materially from what is currently anticipated. Factors which may cause actual results in future periods to differ from current expectations include, among other things, the continued desirability and customer acceptance of existing and future product lines (including licensed product lines), the successful integration of acquisitions, new stores and new licensees into existing operations, possible cancellations of wholesale orders, the success of competitive products, the continued availability of adequate sources of capital, general economic conditions, acts of terrorism or acts of war, government regulation, currency fluctuations and possible future litigation. 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 affect the forward-looking statements contained herein and in the Company's other public documents.
Contact: Carlos Alberini
President & Chief Operating Officer
(213) 765-3582
Frederick G. Silny
SVP & Chief Financial Officer
(213) 765-3289
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three Months Ended
October 1, September 25,
2005 2004
$ % $ %
Net revenue
Product sales $251,695 94.8% $183,553 92.8%
Net royalties 13,905 5.2% 14,284 7.2%
265,600 100.0% 197,837 100.0%
Cost of product sales 151,162 56.9% 122,583 62.0%
Gross profit 114,438 43.1% 75,254 38.0%
Selling, general and administrative
expenses 78,966 29.7% 53,740 27.2%
Earnings from operations 35,472 13.4% 21,514 10.8%
Other (income) expense:
Interest expense 1,608 0.6% 1,399 0.7%
Interest income (608) (0.2%) (139) (0.1%)
Earnings before income taxes 34,472 13.0% 20,254 10.2%
Income taxes 13,788 5.2% 8,428 4.2%
Net earnings $20,684 7.8% $11,826 6.0%
Net earnings per share:
Basic $0.47 $0.27
Diluted $0.46 $0.27
Weighted number of shares outstanding:
Basic 44,409 44,093
Diluted 45,162 44,620
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
Nine Months Ended
October 1, September 25,
2005 2004
$ % $ %
Net revenue
Product sales $624,802 94.7% $470,447 93.1%
Net royalties 34,641 5.3% 34,832 6.9%
659,443 100.0% 505,279 100.0%
Cost of product sales 396,304 60.1% 319,705 63.3%
Gross profit 263,139 39.9% 185,574 36.7%
Selling, general and administrative
expenses 204,752 31.0% 156,238 30.9%
Earnings from operations 58,387 8.9% 29,336 5.8%
Other (income) expense:
Interest expense 5,455 0.8% 4,360 0.9%
Interest income (2,086) (0.2%) (344) (0.1%)
Earnings before income taxes 55,018 8.3% 25,320 5.0%
Income taxes 22,007 3.3% 10,607 2.1%
Net earnings $33,011 5.0% $14,713 2.9%
Net earnings per share:
Basic $0.75 $0.33
Diluted $0.74 $0.33
Weighted number of shares outstanding:
Basic 44,282 43,953
Diluted 44,817 44,515
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(in thousands)
Three Months Ended Nine Months Ended
October September October September
1, 25, 1, 25,
2005 2004 2005 2004
Net revenue:
Retail operations $156,332 $132,133 $405,735 $346,905
Wholesale operations 30,955 34,112 88,101 87,415
European operations (1) 64,408 17,308 130,966 36,127
Licensing operations (1) 13,905 14,284 34,641 34,832
$265,600 $197,837 $659,443 $505,279
Earnings (loss) from operations:
Retail operations $18,777 $12,743 $28,826 $23,611
Wholesale operations 1,776 (741) 4,182 (6,687)
European operations (1) 16,911 4,580 27,911 9,363
Licensing operations (1) 7,861 12,130 24,911 28,178
Corporate overhead (9,853) (7,198) (27,443) (25,129)
$35,472 $21,514 $58,387 $29,336
(1) The European operations segment includes net revenue and earnings
from the acquired European Jeanswear licensee commencing from the
acquisition date of January 3, 2005. In 2004, licensing income from
the licensee was included in the licensing operations segment. Net
revenues of the acquired business for the three and nine month
periods ended October 1, 2005 were $33,513 and $67,156,
respectively. Earnings from operations for the acquired business for
the same periods were $6,987 and $10,702, respectively. Licensing
income included in the licensing operations segment for the three
and nine month periods ended September 25, 2004 were $989 and
$4,141, respectively.
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
October 1, December 31, September 25,
2005 2004 2004
ASSETS
Cash and cash equivalents $138,891 $106,003 $63,061
Restricted cash 3,048 3,660 3,927
Receivables, net 103,806 53,915 58,709
Inventories, net 126,387 82,329 105,497
Other current assets 28,446 25,116 18,712
Property and equipment, net 126,905 113,944 109,554
Other assets 58,544 39,337 37,469
Total Assets $586,027 $424,304 $396,929
LIABILITIES AND STOCKHOLDERS' EQUITY
Current installments of notes
payable and long-term debt $38,164 $13,430 $13,111
Other current liabilities 172,566 119,369 117,687
Notes payable and long-term debt,
excluding current installments 45,027 41,396 48,416
Other liabilities 75,807 29,532 17,368
Stockholders' equity 254,463 220,577 200,347
Total Liabilities and
Stockholders' Equity $586,027 $424,304 $396,929
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Nine Months Ended
October 1, September 25,
2005 2004
Net cash provided by operating
activities $91,604 $20,121
Net cash used in investing activities (54,902) (20,768)
Net cash used in financing activities (3,732) (3,443)
Effect of exchange rates on cash (82) (12)
Net increase (decrease) in cash and
cash equivalents 32,888 (4,102)
Cash and cash equivalents at the
beginning of the year 106,003 67,163
Cash and cash equivalents at the end
of the period $138,891 $63,061
Supplemental information:
Depreciation and amortization $25,719 $26,294
Rent 53,349 46,578
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Nine Months Ended
October 1, September 25,
2005 2004
Number of stores at the beginning of
the year 287 265
Store openings 27 16
Store closures (9) (12)
Number of stores at the end of the
period 305 269
Total store square footage at the end
of the period 1,521,000 1,390,000
SOURCE Guess?, Inc.
-0- 11/02/2005
/CONTACT: Carlos Alberini, President & Chief Operating Officer,
+1-213-765-3582, or Frederick G. Silny, SVP & Chief Financial Officer,
+1-213-765-3289, both of Guess?, Inc./
/Web site: http://www.guess.com /
(GES)
CO: Guess?, Inc.
ST: California
IN: REA FAS
SU: ERN CCA
CC-MS
-- LAW008A --
4873 11/02/2005 16:00 EST http://www.prnewswire.com