COMPANY RAISES FISCAL YEAR EPS GUIDANCE TO A RANGE OF $1.79 TO $1.84, FROM A
RANGE OF $1.75 TO $1.80.COMPANY INCREASES QUARTERLY CASH DIVIDEND BY 33.3% TO $0.08 PER SHARE.
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Second Quarter Highlights
- Revenues increased 48% to a record of $388.3 million
- North American comp sales up 16.2%
- Operating margin improved 250 basis points to 15.3%
- Net earnings increased 82% to $37.5 million
LOS ANGELES, Sept. 4 /PRNewswire-FirstCall/ -- Guess?, Inc. (NYSE: GES) today reported financial results for the second quarter of its 2008 fiscal year, which ended August 4, 2007.
Second Quarter 2008 Results
For the second quarter of fiscal 2008, the Company reported record net earnings of $37.5 million, an increase of 81.5% compared to net earnings of $20.6 million for the recast quarter ended July 29, 2006. Diluted earnings per share increased 81.8% to $0.40 per share in the current quarter versus $0.22 per share in the prior year quarter.
Paul Marciano, Chief Executive Officer, commented, "We are very pleased with our record financial results this quarter, which reflect the continued strength of the Guess brand, the success of our ongoing investments in long-term initiatives, such as Europe, Asia, and our accessories lines, and the consistency with which we are growing our business in North America and abroad. We increased our revenues by 48%, as all of our businesses delivered double digit revenue increases."
Mr. Marciano continued, "Strong performance across all of our product lines in our retail business in North America led to a 16.2% same store sales increase for the quarter. This was our 18th consecutive quarter of same store sales growth. Our European segment was especially strong, and contributed nearly half of the Company's revenue growth with a 121% increase in revenues. Strength in our Asian business, driven mainly by our South Korean operation, contributed to a 75% revenue increase in the wholesale segment. Our licensing business also continued to perform well above our expectations - posting revenue growth of 51% in the quarter."
Mr. Marciano concluded, "On a consolidated basis, we increased net earnings by 82%, with each of our business segments contributing to this growth. Our operating margin also improved to 15.3% from 12.8% last year, even with the investments we made in our long term initiatives during the quarter. This marks another quarter of record earnings for our Company, and the 16th consecutive quarter of earnings growth."
Total net revenue for the second quarter of fiscal 2008 increased 48.2% to $388.3 million from $261.9 million in the prior-year period. The Company's retail stores in the U.S. and Canada generated revenue of $201.6 million in the second quarter of fiscal 2008, a 21.4% increase from $166.1 million in the same period a year ago. Comparable store sales increased 16.2% for the quarter ended August 4, 2007, compared to the thirteen weeks ended August 5, 2006. The Company operated 347 retail stores in the U.S. and Canada at the end of the second quarter of fiscal 2008 versus 322 stores a year earlier.
Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 74.5% to $57.3 million in the second quarter of fiscal 2008, from $32.8 million in the prior-year period.
Net revenue from the Company's European segment increased 121.2% to $107.9 million in the second quarter of fiscal 2008, compared to $48.8 million in the prior-year period.
Licensing segment net revenue increased 51.1% to $21.5 million in the second quarter of fiscal 2008, from $14.3 million in the prior-year period.
Operating earnings for the second quarter of fiscal 2008 increased 76.4% to $59.4 million from $33.6 million in the prior-year period. Operating margin in the second quarter improved 250 basis points to 15.3%, compared to the prior year's quarter. This margin expansion was driven by improved leverage over occupancy costs and the positive impact of higher margin businesses in the period.
Six-Month Period Results
For the six months ended August 4, 2007, the Company reported net earnings of $73.0 million, an increase of 76.7% compared to net earnings of $41.3 million for the six months ended July 29, 2006. Diluted earnings per share increased 73.3% to $0.78 per share in the first six months of the current 2008 fiscal year versus $0.45 per share in the comparable six-month period last year.
Total net revenue for the first six months of fiscal 2008 increased 45.2% to $766.2 million from $527.6 million in the prior-year period. The Company's retail stores in the U.S. and Canada generated revenue of $381.1 million in the first six months of fiscal 2008, a 20.2% increase from $317.0 million in the same period a year ago. Comparable store sales increased 15.0% for the six months ended August 4, 2007, compared to the six months ended August 5, 2006. Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 76.0% to $116.5 million in the first six months of fiscal 2008, from $66.2 million in the prior-year period. Net revenue from the Company's European segment increased 95.7% to $226.8 million in the first six months of fiscal 2008, compared to $115.9 million in the prior-year period. Licensing segment net revenue increased 46.3% to $41.9 million in the first six months of fiscal 2008, from $28.6 million in the prior-year period.
Operating earnings for the first six months of fiscal 2008 increased 72.7% to $117.3 million from $67.9 million in the prior-year period. Operating margin in the first six months of fiscal 2008 improved 240 basis points to 15.3%, compared to the prior-year period. This margin expansion was driven by higher product margins, improved leverage over occupancy costs and the positive impact of higher margin businesses in the period.
Outlook
The Company's expectations for the fiscal year ending February 2, 2008, are now as follows:
- Consolidated net revenues are expected to range from $1.56 billion to $1.60 billion.
- Operating margin is expected to be about 17.5%.
- Diluted earnings per share are expected to be in the range of $1.79 to $1.84.
The fiscal year ending February 2, 2008 will include 52 weeks and a four-week January period, compared to the recast year ended February 3, 2007, which included 53 weeks and a five-week January period.
Dividend
The Company also announced today that its Board of Directors has increased its quarterly cash dividend by 33.3% to $0.08 per share on the Company's common stock. The dividend will be payable on October 5, 2007 to shareholders of record at the close of business on September 19, 2007.
The Company will hold a conference call at 4:30 pm (ET) on September 4, 2007 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at http://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, accessories and related consumer products. At August 4, 2007 the Company operated 347 retail stores in the United States and Canada. The Company also distributes its products through better department and specialty stores around the world. For more information about the Company, please visit http://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 fiscal year 2008, 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 our ability to, among other things, anticipate consumer preferences, effectively operate our retail stores, effectively manage inventories, successfully execute our strategies, including our supply chain and international growth strategies, and domestic and international general economic conditions and consumer confidence. 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.
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three Months Ended
August 4, July 29,
2007 2006
$ % $ %
Net revenue
Product sales $366,739 94.5% $247,685 94.6%
Net royalties 21,548 5.5% 14,264 5.4%
388,287 100.0% 261,949 100.0%
Cost of product sales 214,935 55.4% 151,618 57.9%
Gross profit 173,352 44.6% 110,331 42.1%
Selling, general and administrative
expenses 113,991 29.3% 76,683 29.3%
Earnings from operations 59,361 15.3% 33,648 12.8%
Other (income) expense:
Interest expense 387 0.1% 1,794 0.7%
Interest income (2,036) (0.5%) (1,494) (0.6%)
Other, net (530) (0.1%) (827) (0.3%)
Earnings before income taxes and
minority interests 61,540 15.8% 34,175 13.0%
Income taxes 24,036 6.1% 13,652 5.1%
Minority interest 22 --- (123) ---
Net earnings $37,482 9.7% $20,646 7.9%
Net earnings per share:
Basic $0.41 $0.23
Diluted $0.40 $0.22
Weighted number of shares outstanding:
Basic 92,180 90,594
Diluted 93,507 91,936
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
Six Months Ended
August 4, July 29,
2007 2006
$ % $ %
Net revenue
Product sales $724,382 94.5% $499,022 94.6%
Net royalties 41,854 5.5% 28,610 5.4%
766,236 100.0% 527,632 100.0%
Cost of product sales 425,471 55.5% 306,691 58.1%
Gross profit 340,765 44.5% 220,941 41.9%
Selling, general and administrative
expenses 223,470 29.2% 153,016 29.0%
Earnings from operations 117,295 15.3% 67,925 12.9%
Other (income) expense:
Interest expense 1,311 0.2% 3,259 0.6%
Interest income (3,748) (0.5%) (2,721) (0.5%)
Other, net 361 --- (1,124) (0.2%)
Earnings before income taxes and
minority interests 119,371 15.6% 68,511 13.0%
Income taxes 46,399 6.1% 27,317 5.2%
Minority interest (37) --- (123) ---
Net earnings $73,009 9.5% $41,317 7.8%
Net earnings per share:
Basic $0.79 $0.46
Diluted $0.78 $0.45
Weighted number of shares outstanding:
Basic 92,033 90,370
Diluted 93,373 91,782
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(in thousands)
Three Months Ended
August 4, July 29,
2007 2006 % chg
Net revenue:
Retail operations $201,573 $166,095 21%
Wholesale operations 57,278 32,824 75%
European operations 107,888 48,766 121%
Licensing operations 21,548 14,264 51%
$388,287 $261,949 48%
Earnings (loss) from operations:
Retail operations $27,761 $20,939 33%
Wholesale operations 10,193 5,394 89%
European operations 19,366 8,219 136%
Licensing operations 19,107 13,232 44%
Corporate overhead (17,066) (14,136) 21%
$59,361 $33,648 76%
Operating margins:
Retail operations 13.8% 12.6%
Wholesale operations 17.8% 16.4%
European operations 18.0% 16.9%
Licensing operations 88.7% 92.8%
Total Company 15.3% 12.8%
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(in thousands)
Six Months Ended
August 4, July 29,
2007 2006 % chg
Net revenue:
Retail operations $381,102 $316,956 20%
Wholesale operations 116,473 66,184 76%
European operations 226,807 115,882 96%
Licensing operations 41,854 28,610 46%
$766,236 $527,632 45%
Earnings (loss) from operations:
Retail operations $47,653 $34,628 38%
Wholesale operations 20,894 8,466 147%
European operations 47,083 25,163 87%
Licensing operations 36,464 25,120 45%
Corporate overhead (34,799) (25,452) 37%
$117,295 $67,925 73%
Operating margins:
Retail operations 12.5% 10.9%
Wholesale operations 17.9% 12.8%
European operations 20.8% 21.7%
Licensing operations 87.1% 87.8%
Total Company 15.3% 12.9%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
August 4, February 3, July 29,
2007 2007 2006
ASSETS
Cash and cash equivalents $200,456 $207,617 $196,027
Receivables, net 186,905 142,659 109,068
Inventories, net 226,377 173,668 132,453
Other current assets 45,993 39,523 36,911
Property and equipment, net 191,040 162,555 157,755
Other assets 138,393 117,300 104,630
Total Assets $989,164 $843,322 $736,844
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of short-term
borrowings and capital lease
obligations $3,550 $20,804 $26,262
Other current liabilities 325,264 258,725 226,805
Notes payable, long-term debt and
capital lease obligations, excluding
current installments 17,669 17,336 46,946
Other long-term liabilities 104,936 103,126 88,606
Minority interest 4,570 4,607 367
Stockholders' equity 533,175 438,724 347,858
Total Liabilities and Stockholders'
Equity $989,164 $843,322 $736,844
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
Six Months Ended
August 4, July 29,
2007 2006
Net cash provided by operating
activities $61,826 $63,102
Net cash used in investing activities (57,724) (32,813)
Net cash used in financing activities (13,634) (2,087)
Effect of exchange rates on cash 2,371 631
Net (decrease) increase in cash and
cash equivalents (7,161) 28,833
Cash and cash equivalents at the
beginning of the year 207,617 167,194
Cash and cash equivalents at the end
of the period $200,456 $196,027
Supplemental information:
Depreciation and amortization $24,558 $17,888
Rent 55,296 41,195
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Six Months Ended
August 4, July 29,
2007 2006
Number of stores at the beginning of
the year 334 311
Store openings 20 17
Store closures (7) (6)
Number of stores at the end of the
period 347 322
Total store square footage at the end
of the period 1,646,000 1,574,000
Contacts: Carlos Alberini
President & Chief Operating Officer
(213) 765-3582
Dennis R. Secor
SVP & Chief Financial Officer
(213) 765-3289
Joseph Teklits
Integrated Corporate Relations
(203) 682-8258
SOURCE Guess?, Inc.