Fourth Quarter ResultsFor the fourth quarter ended December 31, 2001, the Company reported net earnings, before charges, of $1.7 million, or diluted earnings of $0.04 per share. These results exclude severance charges of $0.5 million, or $0.3 million after taxes. Including the charges, net earnings were $1.4 million, or diluted earnings of $0.03 per share. The results are in line with previously revised expectations of diluted earnings per share of $0.01 to $0.03, and compare to a net loss in the fourth quarter of 2000 of $7.4 million, or a diluted loss of $0.17 per share, excluding restructuring, impairment and severance charges of $8.6 million, or $5.7 million after taxes. Including these charges, the net loss in the fourth quarter of 2000 was $13.1 million, or a diluted loss of $0.30 per share.
Maurice Marciano, Co-Chairman and Co-Chief Executive Officer, commented, "Consistent with previous quarters this year, we experienced a challenging retail environment during the fourth quarter that adversely impacted our Company's revenues and profitability. However, over the course of 2001 we took broad steps to assure the strength and efficiency of our organization and to position the Company and the Guess? brand for profitable growth and, to some degree, these efforts helped mitigate the impact of the difficult industry conditions we faced. In particular, under the leadership of an expanded management team, we substantially improved our balance sheet, reduced our cost structure and inventory levels, and instituted new processes to more closely gauge our performance and plan for the future. As a result, we ended the year with no borrowings under our domestic credit facility, an overall reduction in total debt of 25% to $88 million, and short-term investments of $18 million. And, SG&A expenses declined by 14% for the year, or $34 million, in spite of an increase of 9% in our retail square footage. Though the retail climate remains challenging, our team has entered 2002 clearly focused on building on our momentum to deliver improved operating performance for the year and long-term sustainable growth."
Total net revenue declined 6.6% to $183.4 million in the fourth quarter of 2001 from $196.3 million in the fourth quarter of 2000. Net revenue from product sales, including the Company's retail stores and wholesale operations, declined 6.8% to $174.8 million in the fourth quarter of 2001 from $187.5 million in the same fiscal period last year.
The Company's retail stores, including those in Canada, generated revenue of $122.5 million in the 2001 fourth quarter, a decrease of 3.2% from $126.5 million reported in the same period a year ago. Comparable store sales decreased 8.4% in the fourth quarter of 2001 versus the year-ago period.
Net revenue from the Company's wholesale business decreased 14.3% to $52.3 million in the fourth quarter of 2001 from $61.0 million for the 2000 period.
Net revenue from the licensing segment decreased 2.3% to $8.6 million in the 2001 fourth quarter from $8.8 million in the fourth quarter last year.
Gross profit was $60.3 million, or 32.9% of net revenue, in the fourth quarter of 2001, compared to $57.9 million, or 29.5% of net revenue, in the comparable 2000 period. Gross profit in the wholesale segment improved compared to the fourth quarter of the prior year due primarily to improved inventory positions of our wholesale customers. In the retail segment, increased occupancy costs, lower store sales productivity and higher markdowns contributed to the lower gross margin for the quarter.
Selling, general and administrative (SG&A) expenses decreased by $10.8 million to $54.2 million, or 29.6% of net revenue, in the 2001 fourth quarter from $65.0 million, or 33.1% of net revenue, in the 2000 fourth quarter. The overall SG&A expense reduction of 16.6% from the same period last year resulted from cost containment initiatives in both the retail and wholesale businesses, which were partially offset by the costs of operating new stores.
Earnings from operations, including restructuring, impairment and severance charges, were $5.6 million in the fourth quarter of 2001, versus a loss from operations of $15.7 million in the comparable year-ago period. The wholesale segment posted a loss from operations of $12.2 million for the fourth quarter of 2001, compared to a loss from operations of $13.1 million for the same period last year. The retail segment posted earnings from operations of $10.9 million in the 2001 fourth quarter, versus a loss from operations of $10.4 million in the 2000 fourth quarter. Earnings from operations for the licensing segment decreased to $6.9 million in the fourth quarter of 2001 from $7.8 million for the same period last year.
Fiscal Year ResultsFor the fiscal year ended December 31, 2001, the Company reported net earnings, before charges, of $9.4 million, or diluted earnings of $0.21 per share. Including restructuring, impairment and severance charges of $5.5 million, or $3.2 million after taxes, net earnings were $6.2 million, or diluted earnings of $0.14 per share. In the comparable period of 2000, the Company posted net earnings of $20.4 million, or diluted earnings of $0.47 per share, excluding restructuring, impairment and severance charges of $7.1 million, or $3.9 million after taxes. Including these charges, net earnings for 2000 were $16.5 million, or diluted earnings of $0.38 per share.
Total net revenue declined 13.0% to $677.6 million for the 2001 fiscal year from $779.2 million in the prior fiscal year. Net revenue from product sales, including the Company's retail stores and wholesale operations, declined 13.6% to $640.7 million in the 2001 fiscal year from $741.4 million in 2000.
The Company's retail stores, including Canada, generated sales of $380.6 million for fiscal 2001, down 3.0% from $392.5 million last year. Comparable store sales declined 13.2% for the 2001 fiscal year.
Net revenue from the Company's wholesale business in fiscal 2001 declined by 25.4% to $260.1 million from $348.9 million in 2000.
Net revenue from licensing was $36.9 million for the 2001 year, a slight decrease from $37.8 million in 2000.
Gross profit decreased to $229.8 million, or 33.9% of net revenue, for the 2001 fiscal year, from $283.6 million, or 36.4% of net revenue, in 2000. Lower revenues and losses on sales of excess inventory to the off-price channel in the wholesale business contributed to the decline in gross profit for the 2001 year. In addition, in the retail segment, increased occupancy costs, lower store sales productivity and higher markdowns contributed to the lower gross margin for the year.
SG&A expenses decreased to $200.5 million for the fiscal year 2001 from $234.1 million in the same period in 2000, a decline of 14.4%, as a result of cost containment programs in both the wholesale and retail businesses, which more than offset the costs to operate the new stores. SG&A expenses for 2000 included $5.3 million of start-up costs related to the new distribution center.
Earnings from operations, including the above-mentioned charges, were $23.8 million for the 2001 fiscal year, versus $42.5 million for 2000. The loss from operations for the wholesale segment was $11.2 million, compared to earnings from operations of $8.3 million a year ago. For the retail segment, earnings from operations reached $4.1 million, compared to earnings from operations of $3.4 million for last year. Earnings from operations for the licensing segment for fiscal 2001 increased to $30.9 million from $30.8 million in fiscal year 2000.
Fiscal 2002 OutlookIn the current economic environment, the Company continues to plan its business cautiously, focusing on opportunities to increase sales and margins while controlling costs and inventory levels. At this time, the Company anticipates total revenues for the 2002 fiscal year to decline by approximately 10% from 2001 levels, with the first half of the year down by about 20% and the second half approximately equal to that of the prior year. The Company expects diluted earnings per share for 2002 to be in the range of $0.27 to $0.35. The Company anticipates diluted losses per share for the first and second quarters of 2002 in the range of $0.08 to $0.10, and $0.05 to $0.07, respectively. For the third and fourth quarters of 2002, the Company expects diluted earnings per share to be in the range of $0.19 to $0.21, and $0.25 to $0.27, respectively.
The Company will report retail sales for fiscal February 2002 after the market closes on March 6, 2002. Comparable store sales for the month are estimated to decline in the mid single digit range compared to the year-ago period.
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.
2001 Share Repurchase ProgramIn 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 fourth quarter of 2001, the Company did not purchase any stock. During 2001, the Company had 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 February 28, 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 Thursday, March 7th at 7:30 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, 2000, 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 Earnings
(in thousands, except per share data)
Fourth Quarter Ended
Dec 31, Dec 31,
2001 2000
$ % $ %
Net revenue
Product sales $ 174,816 95.3% $187,509 95.5%
Net royalties 8,560 4.7% 8,820 4.5%
183,376 100.0% 196,329 100.0%
Cost of sales 123,060 67.1% 138,398 70.5%
Gross profit 60,316 32.9% 57,931 29.5%
Selling, general and
administrative expenses 54,194 29.6% 64,992 33.1%
Severance recovery
relating to
distribution
facility relocation --- ---
Restructuring,
impairment and
severance charges 535 0.3% 8,623 4.4%
Earnings (loss) from
operations 5,587 3.0% (15,684) (8.0%)
Other expense (income):
Interest expense, net 3,321 1.8% 3,451 1.8%
Other, net --- 0.0% 654 0.3%
Earnings before income
taxes 2,266 1.2% (19,789) (10.1%)
Income taxes (benefit) 900 0.5% (6,700) (3.4%)
Net earnings (loss) $ 1,366 0.7% $ (13,089) (6.7%)
Net earnings (loss)
per share:
Basic $ 0.03 $ (0.30)
Diluted $ 0.03 $ (0.30)
Weighted average
shares outstanding:
Basic 43,347 43,564
Diluted 43,602 43,564
Year Ended
Dec 31, Dec 31,
2001 2000
$ % $ %
Net revenue
Product sales $ 640,700 94.6% $ 741,412 95.1%
Net royalties 36,920 5.4% 37,805 4.9%
677,620 100.0% 779,217 100.0%
Cost of sales 447,825 66.1% 495,604 63.6%
Gross profit 229,795 33.9% 283,613 36.4%
Selling, general and
administrative expenses 200,464 29.6% 234,067 30.0%
Severance recovery
relating to
distribution
facility relocation --- (1,545) (0.2%)
Restructuring,
impairment and
severance charges 5,502 0.8% 8,623 1.1%
Earnings (loss) from
operations 23,829 3.5% 42,468 5.5%
Other expense (income):
Interest expense, net 12,605 1.9% 13,756 1.8%
Other, net 482 0.1% (881) (0.1%)
Earnings before income
taxes 10,742 1.6% 29,593 3.8%
Income taxes (benefit) 4,500 0.7% 13,100 1.7%
Net earnings (loss) $ 6,242 0.9% $ 16,493 2.1%
Net earnings (loss)
per share:
Basic $ 0.14 $ 0.38
Diluted $ 0.14 $ 0.38
Weighted average
shares outstanding:
Basic 43,656 43,464
Diluted 43,958 43,819
Guess?, Inc. and Subsidiaries
Condensed Consolidated Segment Data
(in thousands)
Fourth Quarter Ended Year Ended
Dec 31, Dec 31, Dec 31, Dec 31,
2001 2000 2001 2000
Net revenue
Retail operations $ 122,550 $ 126,456 $ 380,576 $ 392,539
Wholesale operations 52,266 61,053 260,124 348,873
Licensing operations 8,560 8,820 36,920 37,805
$ 183,376 $ 196,329 $ 677,620 $ 779,217
Earnings (loss) from
operations
Retail operations $ 10,870 $ (10,392) $ 4,134 $ 3,372
Wholesale operations (12,235) (13,147) (11,234) 8,289
Licensing operations 6,952 7,855 30,929 30,807
$ 5,587 $ (15,684) $ 23,829 $ 42,468
Guess?, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(in thousands)
Dec 31, Dec 31,
2001 2000
ASSETS
Cash and investments $ 33,090 $ 14,230
Receivables, net 40,500 34,383
Inventories, net 96,105 144,220
Other current assets 19,341 33,259
Property and equipment, net 145,385 168,299
Other assets, at cost, net of
accumulated amortization 28,042 25,292
Total assets $ 362,463 $ 419,683
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 93,773 $ 129,803
Notes payable and long-term
debt, excluding current
installments 80,119 103,781
Other liabilities 10,647 10,943
Stockholders' equity 177,924 175,156
Total liabilities and
stockholders' equity $ 362,463 $ 419,683
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Year Ended December 31,
2001 2000
Net cash provided by operating
activities $ 71,780 $ 30,172
Net cash used by investing activities (37,215) (53,233)
Net cash provided by (used in)
financing activities (32,914) 30,333
Effect of exchange rates on cash (113) (79)
Net increase in cash 1,538 7,193
Cash at beginning of the year 13,332 6,139
$ 14,870 $ 13,332
Supplemental information:
Depreciation and amortization $ 41,022 $ 34,192
Guess?, Inc. and Subsidiaries
Retail Store Data
Year Ended December 31,
2001 2000
Number of stores at the beginning of
the year 212 159
Store openings 18 56
Store closures (3) (3)
Number of stores at the end of the year 227 212
Total store square footage at the end
of the year 1,171,000 1,072,000
CONTACT: Guess?, Inc.
Carlos Alberini, 213/765-3582
Frederick G. Silny, 213/765-3504
or
Kekst and Company
Wendi Kopsick/Molly Morse, 212/521-4800
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