-- Fiscal Year 2009 EPS Reached a Record of $2.28, Including Non-Cash Impairment Charges of $0.17, Compared to $1.99 Last Year
Fourth Quarter Fiscal 2009 Highlights
-- Global revenues increased 9% to a record of $561 million
-- European revenues increased 18%
-- North American retail revenues increased 7%; comp sales decreased 6.5%
-- Operating margin decreased to 12.2%, or to 16.2% excluding impairment charge
-- Adjusted EPS, excluding impairment charge, increased 14% to $0.67
Fiscal Year 2009 Highlights
-- Global revenues increased 20% to a record of $2.1 billion
-- European revenues increased 34%
-- North American retail revenues increased 13%; comp sales increased 1.0%
-- Operating margin decreased to 15.7%, or to 16.9% excluding impairment charges
-- Adjusted EPS, excluding impairment charges, increased 23% to $2.45
LOS ANGELES, March 17, 2009 /PRNewswire-FirstCall via COMTEX/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the fourth quarter and fiscal year ended January 31, 2009.
Fourth Quarter Fiscal 2009 Results
For the fourth quarter of fiscal 2009, the Company reported net earnings of $47.9 million, a decrease of 13.2% compared to net earnings of $55.2 million for the quarter ended February 2, 2008. Diluted earnings per share decreased 11.9% to $0.52 in the current quarter, including a $0.13 favorable impact from a lower effective tax rate, a $0.04 favorable impact of a European revenue shift, and a $0.06 unfavorable impact from currency translation, versus $0.59 in the prior-year quarter. In the quarter, the Company recorded a $22.3 million non-cash asset impairment charge (compared to $0.2 million in the prior year fourth quarter) related to long-lived assets associated with retail stores in North America and Asia. Excluding the impairment charge, the Company's adjusted net earnings were $62.0 million in the current fourth quarter, an increase of 12.1% compared to adjusted net earnings of $55.3 million for the quarter ended February 2, 2008. Adjusted diluted earnings per share increased 13.6% to $0.67 from $0.59 in the comparable period last year.
Paul Marciano, Chief Executive Officer, commented, "Our performance was solid during the fourth fiscal quarter of 2009, especially considering the unprecedented global economic crisis and significant currency headwinds we encountered during the period. We took quick and decisive actions to streamline our operations, reduce our inventory position and decelerate new store development. As we had anticipated, our retail business was affected by the current environment, which impacted sales and margins negatively, resulting in a decrease in profitability for the segment."
Mr. Marciano continued, "Europe delivered very good results in the period, with an operating earnings growth of 40%. Once again, our results demonstrate the power of our balanced business model. Excluding the non-cash charge, net earnings increased by 12.1% in the quarter."
Mr. Marciano concluded, "Our long term strategy remains unchanged. We will continue to invest in international expansion. We will continue to prudently manage our business, with focused execution on cost control and inventory management. We will also deploy our capital carefully, making targeted and compelling investments that enhance shareholder value. We believe that our brand's vitality, our diversified business model, our seasoned management team and our solid balance sheet, position us well to remain strong and take advantage of the opportunities that few in this market will have."
Total net revenue for the fourth quarter of fiscal 2009 increased 9.0% to $561.1 million from $514.6 million in the prior fourth quarter period. During the quarter, the Company's retail stores in North America generated revenue of $288.6 million, a 6.5% increase from $270.9 million in the prior-year quarter. Comparable store sales for the current fourth quarter decreased 6.5% compared to the same period a year ago. The Company's wholesale segment, which includes its Asian operations, generated revenue of $69.9 million during the quarter, a 7.5% increase from $65.1 million in the prior-year quarter. The Company's European segment generated revenue of $179.9 million during the quarter, an increase of 18.2% when compared to $152.2 million in the prior-year quarter. During the period, the Company benefited from a $14.0 million shift in revenues in Europe due to early product shipments. The Company's licensing segment generated revenue of $22.6 million, a 14.5% decrease from $26.5 million in the prior-year period. At the end of fiscal year 2009, the Company operated 425 retail stores in the U.S. and Canada, versus 373 stores a year earlier.
Operating earnings for the fourth quarter of fiscal year 2009 decreased 28.8% to $68.5 million from $96.2 million in the fourth quarter of the prior year. Operating earnings in the current period included the $22.3 million non-cash asset impairment charge and a $7.6 million unfavorable currency translation impact. Operating margin in the fourth quarter decreased 650 basis points to 12.2%, compared to the prior year's quarter. This operating margin contraction was driven by the asset impairment charge, higher product markdowns due to the promotional retail environment and occupancy deleverage due to negative same store sales, which more than offset leverage in SG&A expenses.
The Company's net earnings benefited from a lower effective tax rate in the current quarter. For the fourth quarter, the tax rate was 22.9%, compared to 42.2% in the prior year's quarter. The lower tax rate for the period resulted from updating the annual effective tax rate analysis for fiscal year 2009, which was 32.6%, compared to 39.8% last year. The lower annual tax rate resulted from an increase in profits in lower tax jurisdictions.
Excluding the non-cash impairment charge, adjusted operating earnings declined 5.8% to $90.7 million from $96.4 million in the fourth quarter of the prior year period. Adjusted operating margin declined 250 basis points to 16.2% from 18.7% in the prior year period. The adjusted effective tax rate was 26.6% compared to 42.1% in the prior year quarter.
Fiscal Year 2009 Results
For the fiscal year ended January 31, 2009, the Company reported net earnings of $213.6 million, an increase of 14.5% compared to net earnings of $186.5 million for the year ended February 2, 2008. Diluted earnings per share increased 14.6% to $2.28 in fiscal year 2009 versus $1.99 in the prior year. Excluding impairment charges of $24.4 million in the current fiscal year and $0.6 million in the prior year, the Company's adjusted net earnings were $229.0 million, an increase of 22.6% compared to adjusted net earnings of $186.8 million for the year ended February 2, 2008. Adjusted diluted earnings per share increased 23.1% to $2.45 from $1.99 in the prior year.
Total net revenue for fiscal year 2009 increased 19.6% to $2.09 billion from $1.75 billion in the prior year. The Company's retail stores in North America generated revenue of $978.0 million for fiscal year 2009, an increase of 13.4% from $862.4 million in the prior year. Comparable store sales for fiscal 2009 increased 1.0% compared to the same period a year ago. Net revenue from the Company's wholesale segment, which includes its Asian operations, increased 14.6% in fiscal year 2009 to $296.2 million from $258.4 million in the prior year. Net revenue from the Company's European segment increased 33.5% to $719.0 million in fiscal year 2009, compared to $538.4 million in the prior year. Licensing segment net revenue increased 10.5% to $100.3 million in fiscal year 2009, compared to $90.7 million in the prior year.
Operating earnings for fiscal year 2009 increased 6.4% to $328.8 million, from $309.1 million in the prior year. Operating earnings in the current year included $24.4 million in non-cash asset impairment charges, partially offset by a $5.2 million favorable currency translation benefit. Operating margin for fiscal year 2009 decreased by 200 basis points to 15.7%. This margin decline was driven by the asset impairment charges and by lower product margins, which more than offset leverage in SG&A expenses.
The Company's net earnings benefited from a lower effective tax rate in fiscal 2009. For the year, the tax rate was 32.6%, compared to 39.8% in the prior year. The lower tax rate was due primarily to an increase of profits in lower tax jurisdictions.
Excluding the non-cash impairment charges, fiscal 2009 adjusted operating earnings increased 14.1% to $353.2 million from $309.7 million in fiscal 2008. Fiscal 2009 adjusted operating margin declined 80 basis points to 16.9% from 17.7% in fiscal 2008. The fiscal 2009 adjusted effective tax rate was 32.9% compared to 39.8% in fiscal 2008.
Share Repurchase
During the fourth quarter of fiscal 2009, the Company repurchased 1.9 million shares of its common stock at an average purchase price of $14.43, totaling $27.5 million. As of January 31, 2009, the Company had remaining approval under its existing repurchase program to purchase $139.5 million of its common stock.
Fiscal 2010 Outlook
For the first quarter of fiscal year 2010, the Company provided the following outlook:
- Consolidated net revenues are expected to range from $425 million to $445 million, after considering a $14.0 million shift in revenues in Europe, which benefited the fourth quarter of fiscal year 2009.
- Operating margin is expected to be about 9.0%.
- Diluted earnings per share are expected to be in the range of $0.26 to $0.30, after considering the $0.04 impact of the European revenue shift.
The significant volatility in the global economy presents a substantial challenge to forecasting future consumer behavior and future financial results. Therefore, the Company is not providing specific revenue, operating margin or diluted earnings per share guidance for the full fiscal year 2010. The Company did confirm that it expects current conditions to persist for the foreseeable future and that it has undertaken several key initiatives to preserve its resources and capital structure through strong cost controls, prudent inventory management and a curtailment of its retail expansion program.
Dividend
The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.10 per share on the Company's common stock. This dividend will be payable on April 17, 2009 to shareholders of record at the close of business on April 1, 2009.
Adjusted Results
The adjusted results for the fourth quarter and full year of fiscal 2009 discussed herein exclude the impact of non-cash asset impairment charges related to long-lived assets associated with the Company's retail stores located in North America and Asia. These adjusted results are provided to enhance the user's overall understanding of the Company's historical operations and financial performance. Specifically, the Company believes the adjusted results provide investors with relevant period-to-period comparisons that are consistent and more easily understood. The unaudited adjusted results are provided in addition to, and not as alternatives for, the Company's reported results determined in accordance with generally accepted accounting principles. A complete reconciliation of actual results to the adjusted results appears below in the table entitled "Reconciliation of Reported Statement of Operations to the Adjusted Statement of Operations."
The Company will hold a conference call at 4:30 pm (ET) on March 17, 2009 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 January 31, 2009, the Company operated 425 retail stores in the United States and Canada and 690 retail stores outside of North America, of which 96 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 of fiscal 2010 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 leading to a reduction in consumer confidence and discretionary consumer spending; our ability to, among other things, anticipate consumer preferences, effectively operate our various retail concepts, effectively manage inventories 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 foreign operations, including currency fluctuations. 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.
Contact:
Guess?, Inc.
Investor Relations
(213) 765-5578
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three Months Ended
------------------------------------
January 31, 2009 February 2, 2008
$ % $ %
-------- ------ -------- -----
Net revenue
Product sales $538,440 96.0% $488,130 94.9%
Net royalties 22,630 4.0% 26,471 5.1%
------- ---- ------- ----
561,070 100.0% 514,601 100.0%
Cost of product
sales 333,648 59.5% 281,078 54.6%
------- ---- ------- ----
Gross profit 227,422 40.5% 233,523 45.4%
Selling, general
and administrative
expenses 136,678 24.3% 137,173 26.7%
Asset impairment
charges 22,272 4.0% 150 0.0%
------- ---- ------- ----
Earnings from
operations 68,472 12.2% 96,200 18.7%
Other (income) expense:
Interest expense 1,200 0.2% 1,243 0.2%
Interest income (1,015) (0.2%) (2,162) (0.4%)
Other, net 6,000 1.1% 2,104 0.4%
------- ---- ------- ----
Earnings before
income taxes and
minority interests 62,287 11.1% 95,015 18.5%
Income taxes 14,258 2.6% 40,052 7.8%
Minority interest 117 --- (226) ---
------- ---- ------- ----
Net earnings $47,912 8.5% $55,189 10.7%
======= ==== ======= ====
Net earnings per share:
Basic $0.52 $0.60
Diluted $0.52 $0.59
Weighted number of
shares outstanding:
Basic 91,847 92,654
Diluted 92,673 93,943
Adjusted earnings
from operations (1) $90,744 16.2% $96,350 18.7%
Adjusted net
earnings (1) $61,982 11.0% $55,281 10.7%
Adjusted diluted
earnings per share (1) $0.67 $0.59
Twelve Months Ended
-------------------------------------
January 31, 2009 February 2, 2008
$ % $ %
--------- ----- --------- -----
Net revenue
Product sales $1,993,125 95.2% $1,659,184 94.8%
Net royalties 100,265 4.8% 90,732 5.2%
--------- ---- -------- ----
2,093,390 100.0% 1,749,916 100.0%
Cost of product
sales 1,170,762 55.9% 957,147 54.7%
--------- ---- -------- ----
Gross profit 922,628 44.1% 792,769 45.3%
Selling, general
and administrative
expenses 569,398 27.2% 483,079 27.6%
Asset impairment
charges 24,443 1.2% 551 0.0%
--------- ---- -------- ----
Earnings from
operations 328,787 15.7% 309,139 17.7%
Other (income) expense:
Interest expense 4,730 0.2% 3,442 0.2%
Interest income (6,101) (0.3%) (7,546) (0.4%)
Other, net 11,349 0.6% 1,780 0.1%
--------- ---- -------- ----
Earnings before
income taxes and
minority interests 318,809 15.2% 311,463 17.8%
Income taxes 103,784 5.0% 124,099 7.1%
Minority interest 1,463 --- 892 ---
--------- ---- -------- ----
Net earnings $213,562 10.2% $186,472 10.7%
========= ==== ======== ====
Net earnings per share:
Basic $2.31 $2.02
Diluted $2.28 $1.99
Weighted number of
shares outstanding:
Basic 92,561 92,307
Diluted 93,570 93,695
Adjusted earnings
from operations (1) $353,230 16.9% $309,690 17.7%
Adjusted net
earnings (1) $228,962 10.9% $186,811 10.7%
Adjusted diluted
earnings per share (1) $2.45 $1.99
(1) The adjusted results reflect the exclusion of the asset impairment
charges (and related taxes where applicable) recorded during the
periods presented. A complete reconciliation of actual results to
adjusted results is presented in the table entitled "Reconciliation of
Reported Statement of Operations to the Adjusted Statement of
Operations."
Guess?, Inc. and Subsidiaries
Reconciliation of Reported Statement of Operations to the
Adjusted Statement of Operations
(dollars in thousands, except per share data)
The following table provides reconciliations of reported earnings from
operations to adjusted earnings from operations and reported net earnings
to adjusted net earnings, in each case to reflect the exclusion of
non-cash asset impairment charges in North America and Asia.
Three Months Ended
------------------------------------
January 31, 2009 February 2, 2008
% of % of
$ Revenues $ Revenues
------- -------- ------- --------
Asset impairment charges $22,272 $150
Less related income
taxes 8,202 58
------- -------
Asset impairment
charges net of income
taxes $14,070 $92
======= =======
Reported earnings from
operations $68,472 12.2% $96,200 18.7%
Add back asset
impairment charges 22,272 150
------- -------
Adjusted earnings from
operations $90,744 16.2% $96,350 18.7%
======= =======
Reported net earnings $47,912 8.5% $55,189 10.7%
Add back asset
impairment charges net
of taxes 14,070 92
------- -------
Adjusted net earnings $61,982 11.0% $55,281 10.7%
======= =======
Adjusted diluted
earnings per share: $0.67 $0.59
Weighted number of
shares outstanding:
Basic 91,847 92,654
Diluted 92,673 93,943
Twelve Months Ended
-----------------------------------
January 31, 2009 February 2, 2008
% of % of
$ Revenues $ Revenues
------- -------- -------- --------
Asset impairment charges $24,443 $551
Less related income
taxes 9,043 212
-------- --------
Asset impairment
charges net of income
taxes $15,400 $339
======== ========
Reported earnings from
operations $328,787 15.7% $309,139 17.7%
Add back asset
impairment charges 24,443 551
-------- --------
Adjusted earnings from
operations $353,230 16.9% $309,690 17.7%
======== ========
Reported net earnings $213,562 10.2% $186,472 10.7%
Add back asset
impairment charges net
of taxes 15,400 339
-------- --------
Adjusted net earnings $228,962 10.9% $186,811 10.7%
======== ========
Adjusted diluted
earnings per share: $2.45 $1.99
Weighted number of
shares outstanding:
Basic 92,561 92,307
Diluted 93,570 93,695
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended
-----------------------------
January 31, February 2, %
2009 2008 chg
----------- ----------- ---
Net revenue:
Retail operations $288,609 $270,872 7%
Wholesale operations 69,924 65,070 7%
European operations 179,907 152,188 18%
Licensing operations 22,630 26,471 -15%
-------- --------
$561,070 $514,601 9%
======== ========
Earnings (loss) from operations:
Retail operations before asset
impairment charges $33,920 $49,580 -32%
Retail asset impairment charges (21,122) (150)
-------- --------
Retail operations including asset
impairment charges $12,798 $49,430 -74%
Wholesale operations before asset
impairment charges 9,467 11,739 -19%
Wholesale asset impairment charges (1,150) 0
-------- --------
Wholesale operations including asset
impairment charges $8,317 $11,739 -29%
European operations 39,002 27,879 40%
Licensing operations 19,570 23,508 -17%
Corporate overhead (11,215) (16,356) -31%
-------- --------
$68,472 $96,200 -29%
======== ========
Operating margins:
Retail operations before asset
impairment charges 11.8% 18.3%
Retail operations including asset
impairment charges 4.4% 18.2%
Wholesale operations before asset
impairment charges 13.5% 18.0%
Wholesale operations including asset
impairment charges 11.9% 18.0%
European operations 21.7% 18.3%
Licensing operations 86.5% 88.8%
Total Company 12.2% 18.7%
Twelve Months Ended
-----------------------------
January 31, February 2, %
2009 2008 chg
----------- ----------- ---
Net revenue:
Retail operations $977,980 $862,381 13%
Wholesale operations 296,181 258,445 15%
European operations 718,964 538,358 34%
Licensing operations 100,265 90,732 11%
---------- ----------
$2,093,390 $1,749,916 20%
========== ==========
Earnings (loss) from operations:
Retail operations before asset
impairment charges $116,449 $129,074 -10%
Retail asset impairment charges (23,293) (551)
---------- ----------
Retail operations including asset
impairment charges $93,156 $128,523 -28%
Wholesale operations before asset
impairment charges 46,651 49,894 -6%
Wholesale asset impairment charges (1,150) 0
---------- ----------
Wholesale operations including asset
impairment charges $45,501 $49,894 -9%
European operations 168,630 120,818 40%
Licensing operations 86,422 77,941 11%
Corporate overhead (64,922) (68,037) -5%
---------- ----------
$328,787 $309,139 6%
========== ==========
Operating margins:
Retail operations before asset
impairment charges 11.9% 15.0%
Retail operations including asset
impairment charges 9.5% 14.9%
Wholesale operations before asset
impairment charges 15.8% 19.3%
Wholesale operations including asset
impairment charges 15.4% 19.3%
European operations 23.5% 22.4%
Licensing operations 86.2% 85.9%
Total Company 15.7% 17.7%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
January 31, February 2,
2009 2008
----------- -----------
ASSETS
Cash and cash equivalents $294,118 $275,595
Receivables, net 264,340 254,400
Inventories, net 239,675 232,159
Other current assets 96,056 52,585
Property and equipment, net 221,416 229,917
Other assets 130,961 141,572
---------- ----------
Total Assets $1,246,566 $1,186,228
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of borrowings and capital
lease obligations $24,018 $35,254
Other current liabilities 311,866 346,902
Borrowings and capital lease obligations 14,586 18,724
Other long-term liabilities 110,592 122,385
Minority interest 9,466 5,989
Stockholders' equity 776,038 656,974
---------- ----------
Total Liabilities and Stockholders' Equity $1,246,566 $1,186,228
========== ==========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Twelve Months Ended
----------------------------------
January 31, 2009 February 2, 2008
---------------- ----------------
Net cash provided by operating activities $228,625 $180,763
Net cash used in investing activities (102,217) (117,161)
Net cash used in financing activities (99,126) (86)
Effect of exchange rates on cash (8,759) 4,462
-------- --------
Net increase in cash and cash equivalents 18,523 67,978
Cash and cash equivalents at the beginning
of the year 275,595 207,617
-------- --------
Cash and cash equivalents at the end of the
period $294,118 $275,595
======== ========
Supplemental information:
Depreciation and amortization $61,096 $50,579
Rent 159,426 122,305
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Twelve Months Ended
----------------------------------
January 31, 2009 February 2, 2008
---------------- ----------------
Number of stores at the beginning
of the year 373 334
Store openings 57 49
Store closures (5) (10)
--------- ---------
Number of stores at the end of
the period 425 373
========= =========
Total store square footage
at the end of the period 1,953,600 1,759,000
========= =========
SOURCE Guess?, Inc.