Third Quarter Results
The Company reported net earnings of $3.4 million, or diluted earnings of $0.08 per share, for the 2002 third quarter, in line with its previously reported guidance of diluted earnings of $0.05 to $0.08 per share. These results compare to net earnings, including restructuring charges, of $1.3 million, or diluted earnings of $0.03 per share, for the third quarter of 2001. As previously announced, the 2002 third quarter results include proceeds of $4.0 million, or $2.6 million net of tax, from a litigation settlement. Excluding the litigation settlement, net earnings for the third quarter of 2002 were $0.8 million, or diluted earnings of $0.02 per share. The 2001 third quarter results include special charges of $4.4 million, or $2.6 million net of tax. Excluding these charges, net earnings for the 2001 third quarter were $3.9 million, or diluted earnings of $0.09 per share.
Carlos Alberini, President and Chief Operating Officer, commented, "Our third quarter operating performance was negatively impacted by lower sales in our retail and wholesale businesses. As we continue to face challenging conditions across the retail sector, we are focusing on closely managing our inventories, maintaining a strong capital structure and taking steps to further reduce expenses. I believe that the actions we are announcing today will help to ensure Guess? is best positioned within the current environment and reinforce our foundation for the future."
Total net revenue declined 8.5% to $157.8 million in the third quarter of 2002 from $172.4 million in the third quarter of 2001. The Company's retail stores, including those in Canada, generated revenues of $94.8 million in the 2002 third quarter, a 0.7% decrease from $95.5 million reported in the same period a year ago. Comparable store sales decreased 5.4% during the third quarter of 2002 from the year-ago period. Net revenue from the Company's wholesale segment declined 24.0% to $50.7 million in the third quarter of 2002 from $66.7 million for the comparable 2001 period. Wholesale revenue in the third quarter last year included $6.6 million in kids' business, which was licensed out beginning in 2002. Licensing segment net revenue increased 20.6% to $12.3 million in the 2002 third quarter from $10.2 million in the third quarter last year.
Nine Months Results
For the nine months ended September 28, 2002, the Company reported a net loss of $6.7 million, or a diluted loss per share of $0.15, versus net earnings of $4.9 million, or diluted earnings per share of $0.11 in the comparable 2001 period. The 2002 results include the above-mentioned litigation settlement proceeds of $4.0 million, or $2.6 million, net of tax. Excluding the litigation settlement, the net loss for the 2002 nine-month period was $9.3 million, or a diluted loss of $0.21 per share. The 2001 nine-month results include special charges of $5.0 million, or $2.9 million net of tax. Excluding these charges, net earnings for the 2001 nine-month period were $7.8 million, or diluted earnings of $0.18 per share.
Total net revenue declined 15.9% to $415.8 million in the 2002 nine-month period from $494.2 million in the same period in 2001. The Company's retail stores, including those in Canada, generated revenue of $253.5 million for the first nine months of 2002, down 1.7% from $258.0 million for the same period last year. Comparable store sales decreased 5.7% during the nine-month period of 2002. Net revenue from the Company's wholesale segment in the nine months of 2002 declined by 35.9% to $133.3 million from $207.8 million in the first nine months of 2001. Wholesale revenue in the nine-month period last year included $22.8 million in kids' business, which was licensed out beginning in 2002. Licensing segment net revenue was $29.0 million for the 2002 first nine months, a 2.1% increase from $28.4 million for the same period in 2001.
Cost Savings Initiatives
The Company also announced today additional actions it is taking to lower operating costs and increase efficiencies. These steps primarily include the closure or disposition of certain corporate facilities and a few under-performing retail locations, certain asset write-offs and the elimination of certain administrative and support positions. In connection with these actions, the Company will record a pretax charge of between $10.0 million and $12.0 million, or between $6.4 million and $7.7 million after tax, (or $0.15 to $0.18 per share) during the 2002 fourth quarter. The Company expects these steps to generate annual pretax cost savings of approximately $7 million beginning in 2003.
October 2002 Retail Sales
Based on current trends, the Company now anticipates comparable store sales for the fiscal month of October 2002, which ends on November 2, 2002, to decline in the low single digits. The Company will announce October retail sales results on November 6, 2002.
Fiscal 2002 Outlook
Due to continued pressure on both sales and margins, the Company now expects to report diluted earnings per share in the range of $0.10 to $0.13 for the 2002 fourth quarter and a diluted loss per share in the range of $0.02 to $0.05 for the 2002 fiscal year. These results exclude the impact of the fourth quarter charge described above.
Share Repurchase Program
In May 2001, the Company's Board of Directors authorized the Company to repurchase shares of its own stock in the amount of up to $15 million from time to time in open market transactions. During the third quarter of 2002, the Company purchased 606,000 shares at an aggregated cost of $3.2 million, or an average of $5.21 per share. Since the inception of the share repurchase program in May 2001, the Company has purchased 1,137,100 shares at an aggregated cost of $7.1 million, or an average of $6.26 per share.
The Company will hold a conference call at 11:30 am (ET) on October 31, 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, November 7th 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 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)
(Unaudited)
Three Months Ended
-------------------------------------------
Sep 28, Sep 29,
2002 2001
$ % $ %
---------- ---------- ---------- ----------
Net revenue
Product sales $145,524 92.2% $162,250 94.1%
Net royalties 12,274 7.8% 10,159 5.9%
---------- ---------- ---------- ----------
157,798 100.0% 172,409 100.0%
Cost of sales 101,039 64.0% 113,350 65.7%
---------- ---------- ---------- ----------
Gross profit 56,759 36.0% 59,059 34.3%
Selling, general and
administrative expenses 51,704 32.8% 49,173 28.5%
Gain on disposition of
property and equipment -- --
Litigation settlement (4,000) (2.5%) --
Restructuring, impairment
and severance charges -- 4,436 2.6%
---------- ---------- ---------- ----------
Earnings (loss) from
operations 9,055 5.7% 5,450 3.2%
Other (income) expense:
Interest expense, net 2,225 1.4% 3,122 1.8%
Other, net (129) (0.1%) --
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes (benefit) 6,959 4.4% 2,328 1.4%
Income taxes (benefit) 3,585 2.3% 1,000 0.6%
---------- ---------- ---------- ----------
Net earnings (loss) $3,374 2.1% $1,328 0.8%
========== ========== ========== ==========
Net earnings (loss) per
share:
Basic $0.08 $0.03
Diluted $0.08 $0.03
Weighted number of shares
outstanding:
Basic 43,345 43,855
Diluted 43,420 44,072
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Nine Months Ended
-------------------------------------------
Sep 28, Sep 29,
2002 2001
$ % $ %
---------- ---------- ---------- ----------
Net revenue
Product sales $386,781 93.0% $465,884 94.3%
Net royalties 28,985 7.0% 28,360 5.7%
---------- ---------- ---------- ----------
415,766 100.0% 494,244 100.0%
Cost of sales 273,483 65.8% 324,765 65.7%
---------- ---------- ---------- ----------
Gross profit 142,283 34.2% 169,479 34.3%
Selling, general and
administrative expenses 150,178 36.1% 147,333 29.8%
Gain on disposition of
property and equipment -- (1,063) (0.2%)
Litigation settlement (4,000) (1.0%) --
Restructuring, impairment
and severance charges 655 0.2% 4,967 1.0%
---------- ---------- ---------- ----------
Earnings (loss) from
operations (4,550) (1.1%) 18,242 3.7%
Other (income) expense:
Interest expense, net 6,664 1.6% 9,284 1.9%
Other, net (805) (0.2%) 482 0.1%
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes (benefit) (10,409) (2.5%) 8,476 1.7%
Income taxes (benefit) (3,750) (0.9%) 3,600 0.7%
---------- ---------- ---------- ----------
Net earnings (loss) $(6,659) (1.6%) $4,876 1.0%
========== ========== ========== ==========
Net earnings (loss) per
share:
Basic $(0.15) $0.11
Diluted $(0.15) $0.11
Weighted number of shares
outstanding:
Basic 43,499 43,839
Diluted 43,499 44,028
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------- -----------------------
Sep 28, Sep 29, Sep 28, Sep 29,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net revenue:
Retail operations $94,760 $95,474 $253,518 $258,026
Wholesale operations 50,764 66,776 133,263 207,858
Licensing operations 12,274 10,159 28,985 28,360
----------- ----------- ----------- -----------
$157,798 $172,409 $415,766 $494,244
=========== =========== =========== ===========
Earnings (loss) from
operations:
Retail operations $2,531 $1,018 $(6,861) $(6,736)
Wholesale operations (4,473) (4,109) (22,410) 1,001
Licensing operations 10,997 8,541 24,721 23,977
----------- ----------- ----------- -----------
$9,055 $5,450 $(4,550) $18,242
=========== =========== =========== ===========
Guess?, Inc. and Subsidiaries
Selected Consolidated Balance Sheet Data
(in thousands)
(Unaudited)
Sep 28, Dec 31, Sep 29,
2002 2001 2001
----------- ----------- -----------
ASSETS
Cash and cash equivalents $7,907 $31,870 $5,257
Receivables, net 53,349 40,500 50,302
Inventories, net 106,304 96,105 130,411
Other current assets 25,327 20,561 26,819
Property and equipment, net 138,235 145,385 153,455
Other assets 29,188 28,042 24,945
----------- ----------- -----------
Total Assets $360,310 $362,463 $391,189
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $97,427 $93,773 $94,801
Notes payable and long-term debt,
excluding current installments 79,991 80,119 108,672
Other liabilities 12,510 10,647 10,872
Stockholders' equity 170,382 177,924 176,844
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $360,310 $362,463 $391,189
=========== =========== ===========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
(Unaudited)
Nine Months Ended
-----------------------
Sep 28, Sep 29,
2002 2001
----------- -----------
Net cash provided by (used in) operating
activities $(1,529) $6,135
Net cash used in investing activities (19,172) (15,652)
Net cash provided by (used in) financing
activities (3,328) 1,545
Effect of exchange rates on cash 66 (103)
----------- -----------
Net decrease in cash and cash equivalents (23,963) (8,075)
Cash and cash equivalents at the beginning of
the year 31,870 13,332
----------- -----------
Cash and cash equivalents at the end of the
period $7,907 $5,257
=========== ===========
Supplemental information:
Depreciation and amortization $29,467 $30,011
Rent 38,999 36,718
Guess?, Inc. and Subsidiaries
Retail Store Data
Nine Months Ended
-----------------------
Sep 28, Sep 29,
2002 2001
----------- -----------
Number of stores at the beginning of the period 227 212
Store openings 16 15
Store closures (1) (3)
----------- -----------
Number of stores at the end of the period 242 224
=========== ===========
Total store square footage at the end of the
period 1,239,000 1,144,000
=========== ===========
Guess?, Inc.
CONTACT: Guess?, Inc.
Carlos Alberini, 213/765-3582
President & Chief Operating Officer
Frederick G. Silny, 213/765-3289
SVP & Chief Financial Officer
or
Kekst and Company
Wendi Kopsick/Molly Morse
212/521-4800
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