Guess Exceeds Q1 View and Lifts Estimates

by MR Magazine Staff

NEW YORK – Shares of Guess Inc. soared in after-hours trading Tuesday after the company reported higher than expected first quarter earnings and lifted its guidance for the remainder of the year.

The company posted its first quarter results after the close of the equity markets, but its shares shot up 6.1%, to $50.30, in after-hours trading.

In the three months ended May 5, the Los Angeles-based jeanswear and sportswear brand saw its net income increase 71.9% to $35.5 million, or $0.38 a diluted share. The year-ago mark was $20.7 million, or $0.23. The 2007 quarter EPS level exceeded analysts’ consensus estimate of $0.28 by $0.10.

Net revenues were up 42.3% to $377.9 million from $265.7 million. Buoyed by a 13.6% increase in same-store sales during the quarter, retail operations grew 19% to $179.5 million. Meanwhile, wholesale operations, including those for Asia, rose 77.4% to $59.2 million, and European operations advanced 77.2% to $118.9 million. Licensing revenues moved ahead 41.5% to $20.3 million.

Gross margin grew 270 basis points to 44.3% of sales from 41.6% in the year-ago quarter.

“All our business generated double-digit revenue growth, led by strong execution in our international operations,” commented Paul Marciano, chief executive officer. “In Europe, the addition of Focus Europe, our contemporary line, and the growth of our existing businesses drove a 77% sales increase in the segment. Strong sales performance in South Korea drove Asian revenues higher and led to a 77% increase in our wholesale segment revenues.”

The company lifted second quarter guidance to net income per diluted share of $0.31 to $0.33, above estimates of $0.27, on revenues of $335 million to $345 million. For the full year, EPS is expected to reach $1.75 to $1.80, above the analyst view of $1.71, on revenues of $1.51 billion to $1.56 billion.

The quarter was the first during which Guess modified its fiscal year timing to conform to that of US retailers. Net income for the “recast” 2006 fiscal year was calculated at $131.2 million, or $1.42 a diluted share. Revenues were $1.25 billion.

In noting highlights of the quarter, Marciano pointed out “explosive revenue growth” by Guess’s footwear licensee and the completion of the 17th consecutive quarter of same-store sales growth in its retail unit.

Guess ended the first quarter with 336 stores, up from 316 at the same time last year.