![]() | NEWS RELEASE |
FOR IMMEDIATE RELEASE | 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 |
GUESS?, INC. REPORTS RECORD SECOND QUARTER 2008 REVENUES, AN INCREASE OF 48%, AND RECORD SECOND QUARTER EPS OF $0.40, AN INCREASE OF 82%.
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.
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, September 4, 2007 - 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
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.
2
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.
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 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 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.
3
Condensed Consolidated Statements of Operations | |||||||||
(dollars in thousands, except per share data) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | ||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||
Net revenue | |||||||||||||||||||||||||
Product sales | $ | 366,739 | 94.5 | % | $ | 247,685 | 94.6 | % | $ | 724,382 | 94.5 | % | $ | 499,022 | 94.6 | % | |||||||||
Net royalties | 21,548 | 5.5 | % | 14,264 | 5.4 | % | 41,854 | 5.5 | % | 28,610 | 5.4 | % | |||||||||||||
388,287 | 100.0 | % | 261,949 | 100.0 | % | 766,236 | 100.0 | % | 527,632 | 100.0 | % | ||||||||||||||
Cost of product sales | 214,935 | 55.4 | % | 151,618 | 57.9 | % | 425,471 | 55.5 | % | 306,691 | 58.1 | % | |||||||||||||
Gross profit | 173,352 | 44.6 | % | 110,331 | 42.1 | % | 340,765 | 44.5 | % | 220,941 | 41.9 | % | |||||||||||||
Selling, general and administrative expenses | 113,991 | 29.3 | % | 76,683 | 29.3 | % | 223,470 | 29.2 | % | 153,016 | 29.0 | % | |||||||||||||
Earnings from operations | 59,361 | 15.3 | % | 33,648 | 12.8 | % | 117,295 | 15.3 | % | 67,925 | 12.9 | % | |||||||||||||
Other (income) expense: | |||||||||||||||||||||||||
Interest expense | 387 | 0.1 | % | 1,794 | 0.7 | % | 1,311 | 0.2 | % | 3,259 | 0.6 | % | |||||||||||||
Interest income | (2,036 | ) | (0.5 | %) | (1,494 | ) | (0.6 | %) | (3,748 | ) | (0.5 | %) | (2,721 | ) | (0.5 | %) | |||||||||
Other, net | (530 | ) | (0.1 | %) | (827 | ) | (0.3 | %) | 361 | --- | (1,124 | ) | (0.2 | %) | |||||||||||
Earnings before income taxes and minority interests | 61,540 | 15.8 | % | 34,175 | 13.0 | % | 119,371 | 15.6 | % | 68,511 | 13.0 | % | |||||||||||||
Income taxes | 24,036 | 6.1 | % | 13,652 | 5.1 | % | 46,399 | 6.1 | % | 27,317 | 5.2 | % | |||||||||||||
Minority interest | 22 | --- | (123 | ) | --- | (37 | ) | --- | (123 | ) | --- | ||||||||||||||
Net earnings | $ | 37,482 | 9.7 | % | $ | 20,646 | 7.9 | % | $ | 73,009 | 9.5 | % | $ | 41,317 | 7.8 | % | |||||||||
Net earnings per share: | |||||||||||||||||||||||||
Basic | $ | 0.41 | $ | 0.23 | $ | 0.79 | $ | 0.46 | |||||||||||||||||
Diluted | $ | 0.40 | $ | 0.22 | $ | 0.78 | $ | 0.45 | |||||||||||||||||
Weighted number of shares outstanding: | |||||||||||||||||||||||||
Basic | 92,180 | 90,594 | 92,033 | 90,370 | |||||||||||||||||||||
Diluted | 93,507 | 91,936 | 93,373 | 91,782 |
F-1
Consolidated Segment Data | |||||||
(in thousands) |
Three Months Ended | Six Months Ended | ||||||||||||||||||
August 4, | July 29, | % | August 4, | July 29, | % | ||||||||||||||
2007 | 2006 | chg | 2007 | 2006 | chg | ||||||||||||||
Net revenue: | |||||||||||||||||||
Retail operations | $ | 201,573 | $ | 166,095 | 21 | % | $ | 381,102 | $ | 316,956 | 20 | % | |||||||
Wholesale operations | 57,278 | 32,824 | 75 | % | 116,473 | 66,184 | 76 | % | |||||||||||
European operations | 107,888 | 48,766 | 121 | % | 226,807 | 115,882 | 96 | % | |||||||||||
Licensing operations | 21,548 | 14,264 | 51 | % | 41,854 | 28,610 | 46 | % | |||||||||||
$ | 388,287 | $ | 261,949 | 48 | % | $ | 766,236 | $ | 527,632 | 45 | % | ||||||||
Earnings (loss) from operations: | |||||||||||||||||||
Retail operations | $ | 27,761 | $ | 20,939 | 33 | % | $ | 47,653 | $ | 34,628 | 38 | % | |||||||
Wholesale operations | 10,193 | 5,394 | 89 | % | 20,894 | 8,466 | 147 | % | |||||||||||
European operations | 19,366 | 8,219 | 136 | % | 47,083 | 25,163 | 87 | % | |||||||||||
Licensing operations | 19,107 | 13,232 | 44 | % | 36,464 | 25,120 | 45 | % | |||||||||||
Corporate overhead | (17,066 | ) | (14,136 | ) | 21 | % | (34,799 | ) | (25,452 | ) | 37 | % | |||||||
$ | 59,361 | $ | 33,648 | 76 | % | $ | 117,295 | $ | 67,925 | 73 | % | ||||||||
Operating margins: | |||||||||||||||||||
Retail operations | 13.8 | % | 12.6 | % | 12.5 | % | 10.9 | % | |||||||||||
Wholesale operations | 17.8 | % | 16.4 | % | 17.9 | % | 12.8 | % | |||||||||||
European operations | 18.0 | % | 16.9 | % | 20.8 | % | 21.7 | % | |||||||||||
Licensing operations | 88.7 | % | 92.8 | % | 87.1 | % | 87.8 | % | |||||||||||
Total Company | 15.3 | % | 12.8 | % | 15.3 | % | 12.9 | % |
F-2
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 |
F-3
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 |
F-4
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 |
F-5