Raises Fiscal Year 2008 EPS Guidance
Provides Fiscal Year 2009 EPS Guidance
Third Quarter Highlights
Global revenues increased 43% to a record of $469.1 million
-- European revenues up 79%
-- Licensing revenues up 33%
-- North American comp sales up 15.8%
-- Wholesale revenues up 75%
Operating margin improved 30 basis points to 20.4%
Net earnings increased 32% to $58.3 million
LOS ANGELES--(BUSINESS WIRE)--Dec. 4, 2007--Guess?, Inc. (NYSE:GES) today reported financial results for the third quarter of its 2008 fiscal year, which ended November 3, 2007.
Third Quarter 2008 Results
For the third quarter of fiscal 2008, the Company reported record net earnings of $58.3 million, an increase of 32% compared to net earnings of $44.0 million for the recast quarter ended October 28, 2006. Diluted earnings per share increased 29% to $0.62 per share in the current quarter versus $0.48 per share in the prior-year quarter.
Paul Marciano, Chief Executive Officer, commented, "We are very pleased with our solid financial performance this quarter. These results reflect the global strength of our Guess brand and our highly diversified business model. The investments we are making to develop and expand our business in North America, Europe and Asia are clearly yielding positive results. In the period, we increased revenues by 43% to $469.1 million and operating earnings by 45% to $95.6 million - all time records for any quarter in our Company's history. I am particularly pleased with these results, considering that during the quarter we made significant investments to support the Company's future growth."
Mr. Marciano continued, "Once again, all of our business segments delivered double-digit revenue growth and all contributed to the increase in our operating earnings. Overall, this strong performance resulted in a 32% increase in earnings and marked our 17th consecutive quarter of earnings growth. We are encouraged by these results, especially in light of today's challenging retail environment. I believe this success is due to the great product assortment developed by our teams of designers, merchants and licensees worldwide. Based on these results and our recent sales trends, we are confident that we continue to be well positioned for the holiday selling season."
Total net revenue for the third quarter of fiscal 2008 increased 42.7% to $469.1 million from $328.8 million in the prior-year period. The Company's retail stores in the U.S. and Canada generated revenue of $210.4 million in the third quarter of fiscal 2008, a 17.7% increase from $178.8 million in the same period a year ago. Comparable store sales increased 15.8% for the quarter ended November 3, 2007, compared to the thirteen weeks ended November 4, 2006. This represents the 19th consecutive quarter of same store sales growth in North America. The Company operated 365 retail stores in the U.S. and Canada at the end of the third quarter of fiscal 2008 versus 332 stores a year earlier.
Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 75.0% to $76.9 million in the third quarter of fiscal 2008, from $43.9 million in the prior-year period.
Net revenue from the Company's European segment increased 78.8% to $159.4 million in the third quarter of fiscal 2008, compared to $89.1 million in the prior-year period.
Licensing segment net revenue increased 32.6% to $22.4 million in the third quarter of fiscal 2008, from $16.9 million in the prior-year period.
Operating earnings for the third quarter of fiscal 2008 increased 44.6% to $95.6 million from $66.2 million in the prior-year period. Operating margin in the third quarter improved 30 basis points to 20.4%, compared to the prior year's quarter. This margin expansion was driven by improved leverage over occupancy costs and leverage over selling and administrative costs, partially offset by lower product margins.
Nine-Month Period Results
For the nine months ended November 3, 2007, the Company reported net earnings of $131.3 million, an increase of 53.9% compared to net earnings of $85.3 million for the nine months ended October 28, 2006. Diluted earnings per share increased 50.5% to $1.40 per share in the first nine months of the current 2008 fiscal year versus $0.93 per share in the comparable nine-month period last year.
Total net revenue for the first nine months of fiscal 2008 increased 44.2% to $1,235.3 million from $856.4 million in the prior-year period. The Company's retail stores in the U.S. and Canada generated revenue of $591.5 million in the first nine months of fiscal 2008, a 19.3% increase from $495.8 million in the same period a year ago. Comparable store sales increased 15.3% for the nine months ended November 3, 2007, compared to the nine months ended November 4, 2006. Net revenue from the Company's wholesale segment, which includes the Company's Asian operations, increased 75.6% to $193.4 million in the first nine months of fiscal 2008, from $110.1 million in the prior-year period. Net revenue from the Company's European segment increased 88.4% to $386.2 million in the first nine months of fiscal 2008, compared to $205.0 million in the prior-year period. Licensing segment net revenue increased 41.2% to $64.3 million in the first nine months of fiscal 2008, from $45.5 million in the prior-year period.
Operating earnings for the first nine months of fiscal 2008 increased 58.8% to $212.9 million from $134.1 million in the prior-year period. Operating margin in the first nine months of fiscal 2008 improved 150 basis points to 17.2%, compared to the prior-year 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 $1.68 billion to $1.70 billion.
- Operating margin is expected to be about 17.5%.
- Diluted earnings per share are expected to be in the range of $1.93 to $1.96.
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.
The Company also provided the following expectations for the fiscal year ending January 31, 2009:
- Consolidated net revenues are expected to range from $1.97 billion to $2.05 billion.
- Operating margin is expected to be about 18%.
- Diluted earnings per share are expected to be in the range of $2.35 to $2.45.
The Company also announced today that its Board of Directors has approved a quarterly cash dividend of $0.08 per share on the Company's common stock. The dividend will be payable on January 4, 2008 to shareholders of record at the close of business on December 19, 2007.
The Company will hold a conference call at 4:30 pm (ET) on December 4, 2007 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 November 3, 2007 the Company operated 365 retail stores in the United States and Canada and 560 retail stores outside of North America, of which 56 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 fiscal years 2008 and 2009, 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, currency fluctuations 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
-----------------------------------
November 3, October 28,
2007 2006
$ % $ %
-----------------------------------
Net revenue
Product sales $446,672 95.2% $311,914 94.9%
Net royalties 22,407 4.8% 16,902 5.1%
-----------------------------------
469,079 100.0% 328,816 100.0%
Cost of product sales 250,598 53.4% 174,285 53.0%
-----------------------------------
Gross profit 218,481 46.6% 154,531 47.0%
Selling, general and
administrative expenses 122,837 26.2% 88,366 26.9%
-----------------------------------
Earnings from operations 95,644 20.4% 66,165 20.1%
Other (income) expense:
Interest expense 888 0.2% 1,517 0.5%
Interest income (1,636) (0.4%) (1,770) (0.6%)
Other, net (685) (0.1%) (1,646) (0.5%)
-----------------------------------
Earnings before income taxes and
minority interests 97,077 20.7% 68,064 20.7%
Income taxes 37,648 8.1% 23,963 7.3%
Minority interest 1,155 0.2% 111 ---
-----------------------------------
Net earnings $ 58,274 12.4% $ 43,990 13.4%
===================================
Net earnings per share:
Basic $ 0.63 $ 0.48
Diluted $ 0.62 $ 0.48
Weighted number of shares
outstanding:
Basic 92,516 90,846
Diluted 93,760 92,250
Nine Months Ended
-------------------------------------
November 3, October 28,
2007 2006
$ % $ %
-------------------------------------
Net revenue
Product sales $1,171,054 94.8% $810,936 94.7%
Net royalties 64,261 5.2% 45,512 5.3%
-------------------------------------
1,235,315 100.0% 856,448 100.0%
Cost of product sales 676,069 54.7% 480,976 56.2%
-------------------------------------
Gross profit 559,246 45.3% 375,472 43.8%
Selling, general and
administrative expenses 346,307 28.1% 241,382 28.1%
-------------------------------------
Earnings from operations 212,939 17.2% 134,090 15.7%
Other (income) expense:
Interest expense 2,199 0.2% 4,776 0.6%
Interest income (5,384) (0.5%) (4,491) (0.5%)
Other, net (324) --- (2,770) (0.3%)
-------------------------------------
Earnings before income taxes and
minority interests 216,448 17.5% 136,575 15.9%
Income taxes 84,047 6.8% 51,280 5.9%
Minority interest 1,118 0.1% (12) ---
-------------------------------------
Net earnings $ 131,283 10.6% $ 85,307 10.0%
=====================================
Net earnings per share:
Basic $ 1.42 $ 0.94
Diluted $ 1.40 $ 0.93
Weighted number of shares
outstanding:
Basic 92,194 90,486
Diluted 93,515 91,900
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
Three Months Ended Nine Months Ended
--------------------------- ----------------------------
November 3, October 28, % November 3, October 28, %
2007 2006 chg 2007 2006 chg
----------- ----------- --- ----------- ----------- ----
Net revenue:
Retail
operations $210,407 $178,834 18% $ 591,509 $495,790 19%
Wholesale
operations 76,901 43,939 75% 193,375 110,123 76%
European
operations 159,363 89,141 79% 386,170 205,023 88%
Licensing
operations 22,408 16,902 33% 64,261 45,512 41%
----------- ----------- ----------- -----------
$469,079 $328,816 43% $1,235,315 $856,448 44%
=========== =========== =========== ===========
Earnings
(loss) from
operations:
Retail
operations $ 31,440 $ 26,787 17% $ 79,093 $ 61,415 29%
Wholesale
operations 17,261 9,040 91% 38,155 17,506 118%
European
operations 45,856 31,103 47% 92,939 56,266 65%
Licensing
operations 17,969 13,115 37% 54,433 38,235 42%
Corporate
overhead (16,882) (13,880) 22% (51,681) (39,332) 31%
----------- ----------- ----------- -----------
$ 95,644 $ 66,165 45% $ 212,939 $134,090 59%
=========== =========== =========== ===========
Operating
margins:
Retail
operations 14.9% 15.0% 13.4% 12.4%
Wholesale
operations 22.4% 20.6% 19.7% 15.9%
European
operations 28.8% 34.9% 24.1% 27.4%
Licensing
operations 80.2% 77.6% 84.7% 84.0%
Total
Company 20.4% 20.1% 17.2% 15.7%
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(dollars in thousands)
November 3, February 3, October 28,
2007 2007 2006
----------- ----------- -----------
ASSETS
Cash and cash equivalents $ 191,878 $207,617 $163,806
Restricted cash --- --- 16,361
Receivables, net 296,617 142,659 173,750
Inventories, net 222,956 173,668 144,514
Other current assets 46,141 39,523 39,097
Property and equipment, net 219,984 162,555 160,677
Other assets 144,586 117,300 109,337
----------- ----------- -----------
Total Assets $1,122,162 $843,322 $807,542
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current portion of short-term
borrowings and capital lease
obligations $ 43,252 $ 20,804 $ 52,585
Other current liabilities 345,132 258,725 229,159
Notes payable, long-term debt and
capital lease obligations,
excluding current installments 18,152 17,336 41,122
Other long-term liabilities 108,574 103,126 87,930
Minority interest 6,215 4,607 478
Stockholders' equity 600,837 438,724 396,268
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $1,122,162 $843,322 $807,542
=========== =========== ===========
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(dollars in thousands)
Nine Months Ended
-----------------------
November 3, October 28,
2007 2006
----------- -----------
Net cash provided by operating activities $ 50,469 $ 39,514
Net cash used in investing activities (93,202) (47,785)
Net cash provided by financing activities 22,240 4,243
Effect of exchange rates on cash 4,754 640
----------- -----------
Net decrease in cash and cash equivalents (15,739) (3,388)
Cash and cash equivalents at the beginning of
the year 207,617 167,194
----------- -----------
Cash and cash equivalents at the end of the
period $191,878 $163,806
=========== ===========
Supplemental information:
Depreciation and amortization $ 36,835 $ 27,991
Rent 87,956 63,003
Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
Nine Months Ended
-----------------------
November 3, October 28,
2007 2006
----------- -----------
Number of stores at the beginning of the year 334 311
Store openings 39 27
Store closures (8) (6)
----------- -----------
Number of stores at the end of the period 365 332
=========== ===========
Total store square footage at the end of the
period 1,719,000 1,607,000
=========== ===========
CONTACT: Guess?, Inc.
Carlos Alberini
President & Chief Operating Officer
(213) 765-3582
or
Dennis R. Secor
SVP & Chief Financial Officer
(213) 765-3289
or
Joseph Teklits
Integrated Corporate Relations
(203) 682-8258
SOURCE: Guess?, Inc.