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GUESS?, INC. REPORTS FIRST QUARTER RESULTS

First 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 $3.50

LOS ANGELES, May 25, 2011 /PRNewswire via COMTEX/ --

Guess?, Inc. (NYSE: GES) today reported financial results for the first quarter ended April 30, 2011.

First Quarter Fiscal 2012 Highlights

  • Revenues increased across all operating segments
    • Asian 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 quarter

First Quarter Fiscal 2012 Results

For 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.

Outlook

The 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.

Dividend

The 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 Bergman


VP Investor Relations


(213) 765-5578

Guess?, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(amounts in thousands, except per share data)





Three Months Ended




April 30,


May 1,




2011


2010




$

%


$

%









Net revenue








Product sales


$ 563,399

95.1%


$ 514,055

95.3%


Net royalties


28,845

4.9%


25,286

4.7%




592,244

100.0%


539,341

100.0%









Cost of product sales


343,024

57.9%


304,090

56.4%









Gross profit


249,220

42.1%


235,251

43.6%









Selling, general and administrative expenses


178,287

30.1%


158,105

29.3%

Accelerated pension cost amortization


-

0.0%


5,819

1.1%









Earnings from operations


70,933

12.0%


71,327

13.2%









Other income (expense):








Interest expense


(405)

(0.1%)


(195)

(0.0%)


Interest income


1,295

0.2%


301

0.1%


Other, net


(10,002)

(1.7%)


3,428

0.6%









Earnings before income taxes


61,821

10.4%


74,861

13.9%









Income taxes


18,237

3.0%


23,207

4.4%









Net earnings


43,584

7.4%


51,654

9.5%









Net earnings attributable to noncontrolling interests in subsidiaries


902

0.2%


1,319

0.2%









Net earnings attributable to Guess?, Inc.


$ 42,682

7.2%


$ 50,335

9.3%









Earnings per common share attributable to common stockholders:













Basic


$ 0.46



$ 0.54











Diluted


$ 0.46



$ 0.54










Weighted average common shares outstanding attributable to common stockholders:













Basic


91,629



91,902











Diluted


92,171



92,768


Guess?, Inc. and Subsidiaries

Consolidated Segment Data

(dollars in thousands)










Three Months Ended



April 30,


May 1,


%



2011


2010


chg








Net revenue:







North American retail

$ 247,457


$ 235,773


5%


Europe

210,209


186,968


12%


Asia

60,087


48,586


24%


North American wholesale

45,646


42,728


7%


Licensing

28,845


25,286


14%



$ 592,244


$ 539,341


10%






















Earnings (loss) from operations:







North American retail

$ 18,630


$ 24,372


-24%


Europe

33,181


34,482


-4%


Asia

7,101


7,137


-1%


North American wholesale

11,114


10,211


9%


Licensing

25,290


21,860


16%


Corporate overhead

(24,383)


(20,916)


17%


Accelerated pension cost amortization

-


(5,819)





$ 70,933


$ 71,327


-1%















Operating margins:







North American retail

7.5%


10.3%




Europe

15.8%


18.4%




Asia

11.8%


14.7%




North American wholesale

24.3%


23.9%




Licensing

87.7%


86.5%











Total Company

12.0%


13.2%



Guess?, Inc. and Subsidiaries

Selected Condensed Consolidated Balance Sheet Data

(in thousands)










April 30,


January 29,


May 1,



2011


2011


2010








ASSETS










Cash and cash equivalents

$ 426,774


$ 427,037


$ 517,705








Short-term investments

15,035


15,087


-








Receivables, net

377,432


358,482


282,535








Inventories

300,713


294,705


245,836








Other current assets

78,688


68,269


82,079








Property and equipment, net

337,161


313,856


256,962








Other assets

227,085


208,368


169,651









Total Assets

$ 1,762,888


$ 1,685,804


$ 1,554,768








LIABILITIES AND STOCKHOLDERS' EQUITY










Current portion of capital lease obligations and borrowings

$ 2,359


$ 2,177


$ 2,707








Other current liabilities

426,352


428,839


311,992








Capital lease obligations

12,834


12,218


12,752








Other long-term liabilities

164,892


161,665


141,136








Redeemable and nonredeemable noncontrolling interests

35,500


26,029


20,608








Guess?, Inc. stockholders' equity

1,120,951


1,054,876


1,065,573









Total Liabilities and Stockholders' Equity

$ 1,762,888


$ 1,685,804


$ 1,554,768

Guess?, Inc. and Subsidiaries

Condensed Consolidated Cash Flow Data

(in thousands)



Three Months Ended


April 30,


May 1,


2011


2010





Net cash provided by operating activities

$ 47,835


$ 47,784





Net cash used in investing activities

(44,081)


(23,459)





Net cash used in financing activities

(19,409)


(6,655)





Effect of exchange rates on cash

15,392


(2,028)





Net (decrease) increase in cash and cash equivalents

(263)


15,642





Cash and cash equivalents at the beginning of the year

427,037


502,063





Cash and cash equivalents at the end of the period

$ 426,774


$ 517,705





Supplemental information:








Depreciation and amortization

$ 19,894


$ 15,751





Rent

60,021


50,345

Guess?, Inc. and Subsidiaries

Retail Store Data

International Store Count




As of April 30, 2011


As of May 1, 2010



Total


Directly Owned


Total


Directly Owned

Region

Stores


Stores


Stores


Stores











United States and Canada

484


484


433


433











Europe and the Middle East

508


154


418


96











Asia

368


29


344


28











Other

61


19


55


13












1,421


686


1,250


570

Guess?, Inc. and Subsidiaries

Retail Store Data

U.S. and Canada








Three Months Ended



April 30,


May 1,



2011


2010











Number of stores at the beginning of the year

481


432







Store openings

6


4







Store closures

(3)


(3)






Number of stores at the end of the period

484


433






Total store square footage at the end of the period

2,192,000


2,002,000

SOURCE Guess?, Inc.