First Quarter Results
For the first quarter ended March 30, 2002, the Company reported a net loss, before charges, of $3.2 million, or a diluted loss of $0.07 per share. These results exclude restructuring charges of $0.7 million, or $0.4 million after taxes. Including these charges, the net loss was $3.6 million, or a diluted loss of $0.08 per share. These results are in line with the Company's previously stated expectations of a diluted loss per share of $0.08 to $0.10 for the 2002 first quarter, and compare to net earnings in the first quarter of 2001 of $2.3 million, or diluted earnings of $0.05 per share, excluding restructuring and severance charges of $0.4 million, or $0.2 million after taxes. Including these charges, net earnings in the first quarter of 2001 were $2.1 million, or diluted earnings of $0.05 per share.
Maurice Marciano, Co-Chairman and Co-Chief Executive Officer, commented, "Guess?'s financial results for the first quarter were consistent with our previously announced expectations, in spite of a continued difficult retail environment, particularly impacting our wholesale business. Our performance benefited from our ongoing cost reduction efforts, which resulted in a 6.8% decrease in selling, general and administrative expenses during the quarter, as well as improved margins in our retail business, where careful inventory management has contributed to more regular-price sales. In our wholesale business, however, we are continuing to experience challenging conditions that have caused us to reassess our expectations for the remainder of the year. Based on current trends, we now anticipate a lower contribution from the wholesale segment and, as a result, lower earnings for the year than previously expected.
"Our team is working hard to best position Guess? within this challenging environment, to build on the progress we made last year and to improve our performance. We are operating more efficiently, and we are beginning to see better trends in our retail stores, driven in part by our customers' positive response to new product lines. Our objective is to continue this momentum, as we take steps to address our wholesale business with more focused design and strengthened partnering with our wholesale customers. In addition, we continue to examine our operations for opportunities to further lower costs and increase efficiencies. While we are cautious about this year's outlook, we remain confident in the Company's long-term prospects," Mr. Marciano concluded.
Total net revenue declined 18.8% to $138.2 million in the first quarter of 2002 from $170.1 million in the first quarter of 2001. Net revenue from product sales, including the Company's retail stores and wholesale operations, declined 20.1% to $128.3 million in the first quarter of 2002 from $160.5 million in the same fiscal period last year.
The Company's retail stores, including those in Canada, generated revenue of $78.9 million in the 2002 first quarter, a decrease of 0.6% from $79.4 million in the same period a year ago. As previously reported, comparable store sales decreased 4.2% in the first quarter of 2002 versus the year-ago period.
Net revenue from the Company's wholesale business decreased 39.1% to $49.4 million in the first quarter of 2002 from $81.1 million for the 2001 period. Wholesale revenue in last year's first quarter included $10.5 million of kids' business which was licensed out in the 2002 first quarter.
Net revenue from the licensing segment was $9.9 million in the 2002 first quarter, an increase of 3.1% from $9.6 million for the 2001 period.
Gross profit was $45.1 million, or 32.7% of net revenue, in the first quarter of 2002, compared to $58.7 million, or 34.5% of net revenue, in the comparable 2001 period. The decline in gross profit reflects lower full-price shipments in the Company's wholesale segment coupled with increased unprofitable sales through the off-price channel. In the retail segment, gross margin performance improved as the Company experienced lower markdowns as a result of its improved inventory position, partially offset by increased occupancy costs.
Selling, general and administrative (SG&A) expenses decreased by $3.5 million to $48.6 million, or 35.2% of net revenue, in the 2002 first quarter from $52.2 million, or 30.7% of net revenue, in the 2001 first quarter. The overall SG&A expense reduction of 6.8% resulted from cost containment initiatives in both the retail and wholesale businesses, which were partially offset by the costs of operating new stores.
The loss from operations, including restructuring charges, was $4.2 million in the first quarter of 2002, versus earnings from operations of $7.2 million in the comparable year-ago period. The wholesale segment posted a loss from operations of $6.7 million for the first quarter of 2002, compared to earnings from operations of $5.6 million for the same period last year. The retail segment posted a loss from operations of $5.9 million in the 2002 first quarter, versus a loss from operations of $6.7 million in the 2001 first quarter. Earnings from operations for the licensing segment increased to $8.4 million in the first quarter of 2002 from $8.2 million for the same period last year.
April Retail Sales
The Company also reported today retail sales for April 2002, which, as anticipated, reflect the shift in the Easter holiday from April last year to March this year. Total retail sales for the five weeks ended May 4, 2002, were $31.3 million, a decrease of 7.1% from sales of $33.6 million for the five weeks ended May 5, 2001. Comparable store sales for the period declined 10.1%. Comparable store sales for the Company's full priced retail stores decreased 6.3% and comparable store sales at the factory outlet stores decreased 18.6%. For the combined March/April period, total comparable store sales declined 3.1% from the combined March/April period in 2001. For the combined period, comparable store sales in the Company's full priced retail stores increased 1.2% and comparable store sales at the factory outlet stores decreased 12.6%.
Fiscal 2002 Outlook
Based on reduced expectations for its wholesale business for the balance of the year, the Company now anticipates total revenues for fiscal 2002 to decline in the 10% to 13% range from 2001 levels, with a decline of approximately 20% for the first half of the year and a decline in the mid-single digits for the second half. The Company now expects diluted earnings per share for 2002 to be in the range of $0.10 to $0.16. The Company anticipates a diluted loss per share for the second quarter of 2002 in the range of $0.12 to $0.14. For the third and fourth quarters of 2002, the Company expects diluted earnings per share to be in the range of $0.11 to $0.13, and $0.21 to $0.23, respectively.
As of January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," which requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. Eliminating the amortization of goodwill is estimated to have a beneficial impact of $0.01 on 2002 diluted earnings per share, which is included in the above-mentioned forecast for the year.
Share Repurchase Program
In May 2001, the Company's Board of Directors authorized the Company to repurchase shares of its own stock in an amount of up to $15 million from time to time in open market transactions. During the first quarter of 2002, the Company did not purchase any stock. In 2001, under this program the Company purchased 531,100 shares at an aggregate cost of $4.0 million, or an average price of $7.45 per share.
The Company will hold a conference call at 4:30 pm (ET) on May 7, 2002 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 Page" link from the "Guess, Inc." section of the site. The webcast will be archived on the website through Tuesday, May 14th at 8:00 pm (ET).
Guess?, Inc. designs, markets, distributes and licenses one of the world's leading lifestyle collections of contemporary apparel, accessories and related consumer products.
Except for historical information contained herein, certain matters discussed in this press release including but not limited to the Company's expected results of operations and plans to reduce costs and estimated charges, 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 availability of sufficient working capital, the successful integration of new stores into existing operations, the continued desirability and customer acceptance of existing and future product lines, possible cancellations of wholesale orders, the success of competitive products, the success of the Company's programs to strengthen its inventory cost accounting controls and procedures, and the availability of adequate sources of capital. In addition to these factors, the economic and other factors identified in the Company's most recent annual report on Form 10-K for the fiscal year ended December 31, 2001, 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.
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
First Quarter Ended
-------------------
Mar 30, Mar 31,
2002 2001
$ % $ %
-------------- -------------
Net revenue
Product sales $ 128,261 92.8% $160,521 94.4%
Net royalties 9,918 7.2% 9,595 5.6%
--------- -------- -------- --------
138,179 100.0% 170,116 100.0%
Cost of sales 93,063 67.3% 111,412 65.5%
--------- -------- -------- --------
Gross profit 45,116 32.7% 58,704 34.5%
Selling, general and
administrative expenses 48,627 35.2% 52,174 30.7%
Gain on disposition of property
and equipment --- 0.0% (1,063) (0.6%)
Restructuring and severance
charges 655 0.5% 401 0.2%
--------- -------- -------- --------
Earnings (loss) from operations (4,166) (3.0%) 7,192 4.2%
Other expense (income):
Interest expense, net 2,264 1.6% 3,198 1.9%
Other, net (29) (0.0%) 410 0.2%
--------- -------- -------- --------
Earnings (loss) before income
taxes (benefit) (6,401) (4.6%) 3,584 2.1%
Income taxes (benefit) (2,800) (2.0%) 1,500 0.9%
--------- -------- -------- --------
Net earnings (loss) $ (3,601) (2.6%) $ 2,084 1.2%
========= ======== ======== ========
Net earnings (loss) per share:
Basic $ (0.08) $ 0.05
Diluted $ (0.08) $ 0.05
Weighted average shares outstanding:
Basic 43,525 43,620
Diluted 43,525 43,832
Guess?, Inc. and Subsidiaries
Condensed Consolidated Segment Data
(in thousands)
First Quarter Ended
---------------------
Mar 30, Mar 31,
2002 2001
------- -------
Net revenue
Retail operations $ 78,866 $ 79,376
Wholesale operations 49,395 81,145
Licensing operations 9,918 9,595
---------- -------
$ 138,179 $ 170,116
========== =======
Earnings (loss) from operations
Retail operations $ (5,933) $ (6,669)
Wholesale operations (6,677) 5,619
Licensing operations 8,444 8,242
---------- -------
$ (4,166) $ 7,192
========== =======
Guess?, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(in thousands)
Mar 30, Dec 31, Mar 31,
2002 2001 2001
------- ------- --------
ASSETS
Cash $ 5,950 $ 14,870 $ 9,139
Investments 20,762 18,220 1,237
Receivables, net 46,637 40,500 59,349
Inventories, net 82,202 96,105 132,412
Other current assets 21,510 19,341 27,183
Property and equipment, net 141,107 145,385 160,859
Other assets, at cost, net of
accumulated amortization 28,426 28,042 26,110
-------- -------- --------
Total assets $346,594 $362,463 $416,289
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 80,715 $ 93,773 $ 97,296
Notes payable and long-term debt,
excluding current installments 79,990 80,119 129,764
Other liabilities 10,276 10,647 11,291
Stockholders' equity 175,613 177,924 177,938
-------- -------- --------
Total liabilities and
stockholders' equity $346,594 $362,463 $416,289
======== ======== ========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
First Quarter Ended
------------------------
Mar 30, Mar 31,
2002 2001
-------- ---------
Net cash used in operating activities $ (374) $ (30,461)
Net cash used in investing activities (7,608) (1,756)
Net cash provided by (used in) financing activities (927) 28,113
Effect of exchange rates on cash (11) (89)
----------- --------
Net decrease in cash (8,920) (4,193)
Cash at beginning of the year 14,870 13,332
----------- ---------
Cash at end of the period $ 5,950 $ 9,139
=========== =========
Supplemental information:
Depreciation and amortization $ 10,049 $ 9,882
Rent 12,664 11,932
Guess?, Inc. and Subsidiaries
Retail Store Data
First Quarter Ended
-------------------
Mar 30, Mar 31,
2002 2001
-------- -------
Number of stores at the beginning of the quarter 227 212
Store openings 1 7
Store closures --- (2)
-------- -------
Number of stores at the end of the quarter 228 217
======== =======
Total store square footage at the end of the
quarter 1,168,000 1,105,000
========= =========
Guess?, Inc.
CONTACT: Guess?, Inc., Los Angeles
Carlos Alberini, 213/765-3582
Frederick G. Silny, 213/765-3289
or
Kekst and Company, New York
Wendi Kopsick or Molly Morse, 212/521-4800
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