Guess Net Skyrockets in Q4, Year

LAS VEGAS – A record-setting fourth quarter led Guess Inc. across the $1 billion sales threshold and to profits that, for the second consecutive year, were more than twice year-ago levels.

The Los Angeles-based denim and sportswear wholesaler, retailer and licensor also declared a two-for-one stock split, payable to shareholders of record as of Feb. 26 on March 12, and announced the commencement of quarterly dividend payments. The first dividend of 12 cents per common share will be paid March 12, also to shareholders of record Feb. 26.

During the three months ended Dec. 31, net income grew 77.1% to $45.7 million, or 99 cents a diluted share, from $25.1 million, or 57 cents. Earnings per share comfortably exceeded the analyst consensus estimate of 93 cents, which corresponded with the high end of Guess’s previous estimate.

Revenues increased 25.2% to $346.4 million from $276.6 million in last year’s quarter. Retail revenues in the U.S. and Canada were up 16%, to $240.2 million, while same-store sales crossed the double-digit boundary at 10.8%. Wholesale revenues advanced 27.4% to $42 million, European sales leaped 87.4% to $42.8 million, and licensing royalties were up 56% to $21.3 million.

Gross margin In the quarter was up 340 basis points to 46% of sales while operating margin picked up 480 basis points to 20.5%. Included in the gross margin advance were improvements in retail (21.4% versus 17.6%), wholesale (22.6% versus 9.5%) and Europe (11.6% versus 0.8%). Only licensing operations saw operating margins declines, but that was to 92.6% against 94.3% in the fourth quarter of 2005.

“As we look ahead, we continue to see the globalization of our brand as our main focus in 2007 and beyond,” said Paul Marciano, chief executive. “In North America, we plan to continue our retail development of all our retail formats, including the launch of our newest concept, G by Guess. Internationally, we plan to execute on our strategies to develop the European and Asian markets, both of which present outstanding growth opportunities for Guess.”

Guess, which derived almost 70% of its fourth-quarter revenue from retail operations, is moving its fiscal year to conform to the retail calendar including January, rather than its previous adherence to the regular calendar. Guess intends to report results for the transitional January 2007 period when it reports results for the first quarter ending May 5.

For the full year, net income skyrocketed 109.4% to $123.2 million, or $2.68 a diluted share, from $58.8 million, or $1.31. Revenues rose above the $1 billion mark, moving up 26.6%, to $1.19 billion from $936.1 million. In the dominant retail area, U.S. and Canadian revenues expanded 17.7%, to $612.9 million, and were up 12.2% on a same-store basis.

For the fiscal year ending next 2 February, Guess expects revenues of between $1.45 billion and $1.5 billion, operating margins of about 17% and diluted earnings per share of $3.30 to $3.40.

Guess reported quarterly results after the American equity markets closed Wednesday. Earlier in the day, shares declined 36 cents, or 0.5%, to $74.58 in New York Stock Exchange trading.