First Quarter Revenue Increased 22% to a Record of $539 Million
First Quarter EPS Grew 54% to a Record of $0.54
Provides Second Quarter EPS Guidance in the Range of $0.65 to $0.68
Updates Full Year EPS Guidance to the Range of $2.80 to $2.85 Due to the Weakening Euro
First Quarter Fiscal 2011 Highlights
- All business segments delivered double-digit revenue and operating earnings growth
- European revenues increased 28%
- North American retail revenues increased 14%; comp sales up 9.7%
- Asian revenues increased 50%
- Operating margin expanded 230 basis points to 13.2% from 10.9%
- Net earnings increased 55% to $50.3 million
LOS ANGELES, May 27, 2010 /PRNewswire via COMTEX/ --Guess?, Inc. (NYSE: GES) today reported financial results for the first quarter of its 2011 fiscal year, which ended May 1, 2010.
First Quarter Fiscal 2011 Results
For the first quarter of fiscal 2011, the Company reported net earnings of $50.3 million, an increase of 55% compared to net earnings of $32.5 million for the first quarter of fiscal 2010. Diluted earnings per share increased 54% to $0.54 in the current quarter, compared to $0.35 in the prior-year quarter. In the quarter, the Company recorded a $5.8 million charge, or $0.04 per share, related to the acceleration of pension cost amortization resulting from the departure of Carlos Alberini from the Company's supplemental executive retirement plan.
Paul Marciano, Chief Executive Officer, commented, "We are very pleased with our strong performance this quarter. We achieved excellent results across all of our businesses around the world, with each of our segments delivering double-digit revenue growth and improving their profitability significantly. In North America, we posted a 9.7% same store sales increase and our international expansion drove significant growth in the period. Europe and Asia combined represented almost 60% of our quarterly revenue increase. We managed our business effectively, which resulted in an operating margin expansion of 230 basis points, even as we continued to invest in our infrastructure to support our ambitious growth initiatives."
Mr. Marciano continued, "We remain focused on our key priorities for this year: to increase sales productivity across all businesses, to grow our European and Asian businesses and to expand our retail store base in North America. Our brand enjoys tremendous momentum worldwide and we strive to achieve its full potential as we develop our business in many markets where the brand is well known. We have a dedicated management team, a successful and diversified business model and a solid capital structure that position us well to continue to grow our business and deliver solid returns for our shareholders."
Total net revenue for the first quarter of fiscal 2011 increased 22% to $539.3 million from $441.2 million in the prior-year quarter. The Company's retail stores in North America generated revenue of $235.8 million in the first quarter of fiscal 2011, a 13.6% increase from $207.6 million in the same period a year ago. Comparable store sales increased 9.7% (5.8% in constant dollars) for the first quarter of fiscal 2011, compared to the same period a year ago. The Company operated 433 retail stores in the U.S. and Canada at the end of the first quarter of fiscal 2011 versus 429 stores a year earlier.
Net revenue from the Company's North American wholesale segment increased 27.3% to $42.7 million in the first quarter of fiscal 2011, from $33.6 million in the prior-year period.
Net revenue from the Company's Europe segment increased 28.3% to $187.0 million in the first quarter of fiscal 2011, compared to $145.7 million in the prior-year period.
Net revenue from the Company's Asia segment increased 50.4% to $48.6 million in the first quarter of fiscal 2011, from $32.3 million in the prior-year period.
Licensing segment net revenue increased 14.6% to $25.3 million in the first quarter of fiscal 2011, from $22.1 million in the prior-year period.
Operating earnings for the first quarter of fiscal 2011 increased 48.5% to $71.3 million (including a $5.0 million favorable currency translation benefit) from $48.0 million in the prior-year period. Operating margin in the first quarter increased 230 basis points to 13.2%, compared to the prior-year's quarter. This margin expansion was the result of higher product margins in all segments along with occupancy leverage due to the positive same store sales, partially offset by the impact of the accelerated pension cost amortization.
The Company's effective tax rate declined to 31.0% for the first quarter of fiscal 2011, from 33.0% for the first quarter of the prior year.
Outlook
The Company's expectations for the second quarter of fiscal 2011 ending July 31, 2010, are as follows:
- Consolidated net revenues are expected to range from $560 million to $575 million.
- Operating margin is expected to be around 16.0%.
- Diluted earnings per share are expected to be in the range of $0.65 to $0.68.
The Company updated its outlook for the fiscal year ending January 29, 2011, which is now as follows:
- Consolidated net revenues are expected to range from $2.35 billion to $2.40 billion.
- Operating margin is expected to be about 16.5%.
- Diluted earnings per share are expected to be in the range of $2.80 to $2.85.
Based on the continued strengthening of the US dollar against the Euro, this full year outlook includes a further negative translation and margin impact on diluted earnings per share of $0.16 for the remainder of fiscal 2011. This is in addition to the $0.12 negative translation impact that the Company had initially expected for the same period.
Dividend
The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.16 per share on the Company's common stock. The dividend will be payable on June 25, 2010 to shareholders of record at the close of business on June 9, 2010.
Change in Segment Reporting
In the first quarter of fiscal 2011, the Company revised its segment reporting to include its North American wholesale and Asia operations as separate segments. The Company believes this segment reporting better reflects how its five business segments - North American retail, North American wholesale, Europe, Asia and licensing - are managed and each segment's performance is evaluated. The North American retail segment includes the Company's retail operations in North America. The North American wholesale segment includes the Company's wholesale operations in North America. The Europe segment includes both wholesale and retail operations in Europe. The Asia segment includes both wholesale and retail operations in Asia. The licensing segment includes the worldwide licensing operations of the Company. All amounts for fiscal 2010 have been revised to conform to the fiscal 2011 presentation and are included with this release.
The Company will hold a conference call at 5:00 pm (ET) on May 27, 2010 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 May 1, 2010, the Company operated 433 retail stores in the United States and Canada and 817 retail stores outside of North America, of which 137 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 growth plans and future prospects, including guidance for the second quarter and full year of fiscal 2011, 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; 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, 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.
Investor Relations
(213) 765-5578
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(amounts in thousands, except per share data)
Three Months Ended
------------------
May 1, May 2,
2010 2009
$ % $ %
--- --- --- ---
Net revenue
Product sales $514,055 95.3% $419,127 95.0%
Net royalties 25,286 4.7% 22,074 5.0%
------ --- ------ ---
539,341 100.0% 441,201 100.0%
Cost of product sales 304,090 56.4% 263,698 59.8%
------- ---- ------- ----
Gross profit 235,251 43.6% 177,503 40.2%
Selling, general and
administrative expenses 158,105 29.3% 129,469 29.3%
Accelerated pension cost
amortization 5,819 1.1% - 0.0%
----- --- --- ---
Earnings from operations 71,327 13.2% 48,034 10.9%
Other income (expense):
Interest expense (195) (0.0%) (606) (0.1%)
Interest income 301 0.1% 737 0.2%
Other, net 3,428 0.6% 1,266 0.2%
----- --- ----- ---
Earnings before income taxes 74,861 13.9% 49,431 11.2%
Income taxes 23,207 4.4% 16,312 3.7%
------ --- ------ ---
Net earnings 51,654 9.5% 33,119 7.5%
Net earnings attributable to
noncontrolling interests in
subsidiaries 1,319 0.2% 577 0.1%
----- --- --- ---
Net earnings attributable to
Guess?, Inc. $50,335 9.3% $32,542 7.4%
======= === ======= ===
Earnings per common share attributable to common stockholders:
Basic $0.54 $0.35
Diluted $0.54 $0.35
Weighted average common shares outstanding attributable to common
stockholders:
Basic 91,902 90,631
Diluted 92,768 91,158
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended
------------------
May 1, May 2, %
2010 2009 chg
---- ---- ---
Net revenue:
North American retail $235,773 $207,560 14%
North American wholesale 42,728 33,573 27%
Europe 186,968 145,698 28%
Asia 48,586 32,296 50%
Licensing 25,286 22,074 15%
$539,341 $441,201 22%
======== ========
Earnings (loss) from
operations:
North American retail $24,372 $18,007 35%
North American wholesale 10,211 4,926 107%
Europe 34,482 23,139 49%
Asia 7,137 2,496 186%
Licensing 21,860 19,015 15%
Corporate overhead (20,916) (19,549) 7%
Accelerated pension cost
amortization (5,819) -
$71,327 $48,034 48%
======= =======
Operating margins:
North American retail 10.3% 8.7%
North American wholesale 23.9% 14.7%
Europe 18.4% 15.9%
Asia 14.7% 7.7%
Licensing 86.5% 86.1%
Total Company 13.2% 10.9%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
January
May 1, 30, May 2,
2010 2010 2009
---- ---- ----
ASSETS
Cash and cash equivalents $517,705 $502,063 $312,630
Receivables, net 282,535 283,747 270,996
Inventories 245,836 253,162 210,954
Other current assets 82,079 85,191 92,696
Property and equipment, net 256,962 255,308 235,607
Other assets 169,651 151,778 137,502
Total Assets $1,554,768 $1,531,249 $1,260,385
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of borrowings and
capital lease obligations $2,707 $2,357 $30,645
Other current liabilities 311,992 340,396 277,650
Capital lease obligations 12,752 14,137 14,327
Other long-term liabilities 141,136 134,203 114,979
Redeemable and nonredeemable
noncontrolling interests 20,608 19,945 18,095
Guess?, Inc. stockholders' equity 1,065,573 1,020,211 804,689
Total Liabilities and Stockholders'
Equity $1,554,768 $1,531,249 $1,260,385
========== ========== ==========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Three Months Ended
------------------
May 1, May 2,
2010 2009
---- ----
Net cash provided by operating activities $47,784 $44,801
Net cash used in investing activities (23,459) (18,265)
Net cash used in financing activities (6,655) (9,142)
Effect of exchange rates on cash (2,028) 1,118
------ -----
Net increase in cash and cash equivalents 15,642 18,512
Cash and cash equivalents at the beginning of
the year 502,063 294,118
Cash and cash equivalents at the end of the
period $517,705 $312,630
======== ========
Supplemental information:
Depreciation and amortization $15,751 $14,547
Rent 50,345 41,691
Guess?, Inc. and Subsidiaries
Retail Store Data
International Store Count
As of May 1, 2010
Directly
Total Operated
Region Stores Stores
------ ------
United States and Canada 433 433
Europe and the Middle East 418 96
Asia 344 28
Other 55 13
1,250 570
===== ===
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Three Months Ended
------------------
May 1, May 2,
2010 2009
---- ----
Number of stores at the beginning
of the year 432 425
Store openings 4 6
Store closures (3) (2)
Number of stores at the end of the
period 433 429
=== ===
Total store square footage at the
end of the period 2,002,000 1,969,000
========= =========
Guess?, Inc. and Subsidiaries
Consolidated Segment Data - Revised
(in thousands)
(Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Year Ended
Oct 31, Jan 30, Jan 30,
May 2, 2009 Aug 1, 2009 2009 2010 2010
----------- ----------- -------- -------- --------
Net
revenue:
North
American
retail $207,560 $227,460 $239,518 $309,365 $983,903
North
American
wholesale 33,573 33,213 46,124 39,772 152,682
Europe 145,698 210,159 168,829 222,556 747,242
Asia 32,296 29,532 40,527 44,932 147,287
Licensing 22,074 22,059 27,814 25,405 97,352
$441,201 $522,423 $522,812 $642,030 $2,128,466
======== ======== ======== ======== ==========
Earnings
(loss)
from
operations:
North
American
retail $18,007 $30,208 $33,110 $50,962 $132,287
North
American
wholesale 4,926 8,328 12,245 9,667 35,166
Europe 23,139 52,293 40,801 57,002 173,235
Asia 2,496 1,564 5,472 6,293 15,825
Licensing 19,015 18,672 24,176 24,777 86,640
Corporate
overhead (19,549) (19,951) (16,830) (28,007) (84,337)
$48,034 $91,114 $98,974 $120,694 $358,816
======= ======= ======= ======== ========
SOURCE Guess?, Inc.