Guess Inc. bounced back into the good graces of the investment community with second-quarter earnings that fell far less than expected.
Digesting the positive news about the quarter, which was highlighted by improvement in the company’s North American retail operations and in Europe, shares jumped more than 18 percent in the early stages of after-hours trading.
Net income for the three months ended Aug. 3 dropped 7.1 percent to $39.9 million, or 47 cents a diluted share, from $42.9 million, or 47 cents, in the second quarter of 2012. Excluding restructuring charges principally related to European operations, earnings per share were 52 cents, fully 16 cents above the 36 cents expected, on average, by analysts.
Revenues also strongly exceeded consensus estimates, finishing the quarter ahead 0.6 percent at $639 million versus the year-ago result of $635.4 million and Wall Street’s median estimate of a decline to $622.9 million. Gross margin retracted to 38.9 percent of revenues from 39.6 percent a year ago.
“Our biggest priority this year has been to improve sales trends in North American retail,” Paul Marciano, chief executive officer of the Los Angeles-based denim and sportswear marketer, said on late-afternoon conference call. “We are encouraged with our accomplishments over the past three months. We saw a sharp improvement in the [comparable-store sales] trend compared to the first quarter — our comp sales were down 2 percent compared to minus 10 percent in the first quarter.”
Guess began to see positive results from its decision to lower opening price points in its core denim assortment. “Some of the business has moved from some of the higher [price] categories,” acknowledged Russell Bowers, chief financial officer of North American retail. “Last year, we started at $89 and $98. So some of that business last year that was at $98 has now moved to the opening price point [of $79] but because of that we’ve also sold more units and as a result of it we’ve seen our overall sales trends better.”
Overall, North American retail, Guess’ largest segment, had 0.5 percent increase in revenues, to $254.3 million, although operating profit, pressured by both the promotional climate on the continent and investments in the business, declined 38 percent to $10.4 million from $16.8 million.
Growth in emerging markets and the northern tier produced a 1.4 percent increase in European sales, to $250.4 million, as operating income rebounded 59.5 percent to $39.4 million.
Sales in Asia and North American wholesale both declined about 1 percent while operating income rose 25 percent and 10 percent in those businesses, respectively.
G by Guess, the more youth-oriented retail chain, had “a really strong quarter,” according to Bowers. “The comps were up in G by Guess and we also had product margins up in G by Guess during the second quarter. We did a really, really good job of converting the customers that came into our stores.”
Guess raised full-year earnings guidance to a range of $1.78 to $1.92, from earlier guidance of $1.70 to $1.90. Marciano noted that the firm is currently realizing benefits from a greater consistency in marketing — from its stores and advertising to its e-commerce and social media activities — and a greater emphasis on its denim heritage in its marketing messages.
His optimism was tempered by concerns about slowing economic conditions in China, although those were balanced by improvements in South Korea, a troubled market in recent quarters.
The conference call was the first for Guess’ new chief financial officer, Sandeep Reddy, and came just days after the company promoted Michael Relich, its chief information officer since 2004, to chief operating officer, completing an executive realignment begun last year.
There'll be no rest for those headed to Europe for men's, as Paris just closed the gap with Milan. According to a provisional calendar released by the Chambre Syndicale, Paris Men's Week will now open a day earlier on January 16. See new highlights on the official lineup on WWD.com. #wwdnews #wwdfashion (📷: @kukukuba)
BREAKING: Jonathan Saunders is leaving @DVF. The designer has resigned from his position as chief creative officer of Diane von Furstenberg, the company said in a statement on Friday. At the time of his hire, von Furstenberg said Saunders’ arrival symbolized and facilitated her stepping back from the day-to-day duties that occupy the work of a full-time creative director. The British designer joined DVF in May 2016 and was in charge of all product categories. #wwdnews
For @versace_official’s spring ad campaign, the brand emphasized the archival prints from the spring tribute collection dedicated to the late Gianni Versace. Closing out the show were five of Gianni’s favorite models: Cindy, Naomi, Carla, Helena, and Claudia. Bowing on December 18, the new campaign is yet another tribute to supermodel-dom as the images by Steven Meisel are fronted by @iamnaomicampbell, @cturlington, @gisele and more. #wwdfashion
Four-time Oscar-nominated actress Annette Bening has been waiting 20 years to play Gloria Graham in "Film Stars Don't Die in Liverpool," which will be released on December 29. The movie about Graham – a Hollywood star known for her controversial relationship with a younger Englishman named Peter Turner – is based off a memoir Turned wrote. "She felt vulnerable to him, because she loved him, she really did love him. And anyone that we really truly are in love with, we re vulnerable to in a very deep way," said Bening. Read our full interview with the modern icon of an actress on WWD.com. #wwdeye (📷: @ninebagatelles; Styled by @cristinaehrlich)
The crisp white button down: a staple that can be dressed up or down and accessorized throughout the decades. Here, on a Art Basel-goer in 2017 on the left and on the iconic Audrey Hepburn in “Roman Holiday” in 1953 on the right. #tbt #wwdfashion (📷: Andrew Morales)
Known for her work with @victoriassecret, 25-year-old model @georgiafowler is raising her profile in Hollywood. Fowler stars in @vincecamuto’s holiday campaign, which launched in partnership with “Pitch Perfect 3.” “Almost every shoot with Vince Camuto, I’ve had to face a fear…It was definitely a challenge. I’m so grateful for it, though. I’ve always wanted to be a pop star, so that was the perfect chance,” Fowler said. Head to WWD.com to read about Fowler’s experience modeling, including at the #VSFashionShow, and her relationship with Nick Jonas. #wwdeye (📷: @jilliansollazzo)
EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)