Guess Profits Surge

Reflecting improvement in gross margins as well as higher wholesale and licensing revenues, Guess Inc. reported that fourth-quarter earnings rose 25.8 percent, on a 12.4 increase in total sales.

For the three months ended Dec. 31, earnings were $14.9 million, or 33 cents a diluted share, compared with $11.8 million, or 27 cents, a year ago. Analysts had been expecting a profit of 31 cents. Results in the prior year included impairment charges of $1.6 million, most of which related to the closing of the company’s 10 underperforming stores for children.

Revenues climbed to $224 million from $199.3 million in the fourth quarter of 2003. Sales from retail operations rose 11.5 percent to $172 million, while same-store sales increased 4.4 percent. Wholesale revenues were $39.6 million, up 15.9 percent from $34.2 million last year, while licensing segment revenues increased 13.7 percent at $12.4 million.

“As anticipated, retail sales growth during the quarter moderated from the pace seen earlier in the year, and we experienced higher expenses in this segment due to the launch of our new concepts, Marciano and Guess Accessories,” said Carlos Alberini, president and chief operating officer of Los Angeles-based Guess in a Wednesday statement.

For the full-year period, profits at Guess surged 305.8 percent to $29.6 million, or 66 cents a diluted share, versus $7.3 million, or 17 cents, in the prior year. Analysts had the company pegged to earn 64 cents. Results in 2003 also included impairment and severance charges totaling $2.4 million.

Total revenues for the year were up 14.6 percent to $729.3 million, including a rise of 15.9 percent in retail store revenues to $518.9 million, and a comp-store sales gain of 9.9 percent. Wholesale revenues in the year rose 9.4 percent to $163.2 million, while licensing sales totaled $47.2 million, an increase of 18.8 percent.

At year end, Guess operated 287 stores, up from 265 stores in 2003. — Meredith Derby

Unionbay Spreads Its Wings

Unionbay is seeking to broaden its appeal beyond its core junior and young men’s customer, as it rolls out a higher-end contemporary jeans line and unveils an ad campaign with a harder edge.For fall retailing, the Seattle-based denim maker is launching Union, a women’s and men’s line that will target specialty retailers.

“Obviously, the contemporary market is the fast-growing portion of the denim business, and we would like to participate in that market,” said Scott Bonomo, president of the new Union division.

Unionbay, a unit of Seattle Pacific Industries, brought in Bonomo and Silvio Marceca as Union’s creative and design director to compete effectively in the niche, dominated by heavy-hitters such as Seven For All Mankind, Citizens of Humanity and Paper Denim & Cloth.

Bonomo worked at Nordstrom for 15 years in the brand management of new products. Marceca held design positions at Big Star jeans and Guess.

To stay close to the heart of the contemporary denim market, Union products will be designed and produced out of Los Angeles. They ship in July.

“Everything will be…made in the U.S.A. to maintain strong quality control,” Marceca said.

Made with an assortment of fabric from Italy, Turkey and Japan, the line will feature stretch and rigid denim. The core styles are five-pocket jeans in straight and flared legs, along with a trouser and slouchy boy pant. Cigarette and trumpet-flared jeans make up the fashion bodies.

“The main thrust of the line is not using contrived washes, but Union’s engineering and complementary form to women and men,” Marceca said.

Exercising design restraint is key, he said. Indigo thread, hand-stitched labels and a back pocket shaped like a spade are some of the details the duo hopes will set the line apart. Finishes include resin washes that give the denim a shiny polish and a dark wash with a soft hand.

Wholesale prices for the denim will range from $78 to $98. The launch also includes a T-shirt collection done in Tencel lyocell, jersey and cotton modal encompassing typical bodies such as crewneck, cap-sleeve and long-sleeve shirts. Raw edges, hand-whipped stitch detail and creasing are the subtle touches that give the garments a fashion finish, Marceca said.

Wholesale prices of the tops will range from $18 to $30. First-year sales for Union are expected to reach $10 million, Bonomo said.The theme of the brand’s core junior denim spring ad campaign is “Graphic Street Chic” and marks a departure from the squeaky-clean image conveyed by past ads in outdoor locales.

The images, shot by James White against a white backdrop in a Los Angeles studio, utilize ethnic models in provocative poses. One look features a midriff-baring female model striking a defiant stance while the gaze of a male companion rests on her chest.

“This is a little bit sexier, edgier for us,” said Cathie Underwood, vice president of licensing and public relations for Unionbay. “By using a white backdrop, we can draw attention to the product and let it stand on its own.”

Launching in Us Weekly in March, the ads will then run in teen-targeted glossy magazines, such as Lucky, Jane, Cosmo Girl, Teen People and Stuff in April and May. ESPN and Interview magazines are also part of the run and new ad outlets for Unionbay. The firm did not disclose its planned budget for the campaign. — Nola Sarkisian-Miller

Tarrant Warns of Loss

Tarrant Apparel Group revised its fourth-quarter earnings forecast, advising investors that its sales missed earlier targets and that its losses would be deeper than anticipated.

The Los Angeles-based company said it expects to record a loss of $27 million to $27.5 million on sales of $36 million to $38 million for the quarter ended Dec. 31. Previously, the company had forecast a loss of $22.1 million to $23.1 million on sales of $40 million to $45 million. In the fourth quarter of 2003, Tarrant earned $427,000 on sales of $67 million.

The jeansmaker noted that the fourth-quarter loss included a noncash charge of about $23 million related to changing exchange rates.

President and chief executive officer Barry Aved said in a statement that results had been hurt by “softer-than-expected holiday bookings, internal changes faced by several large customers and increased air-freight costs related to congestion in the West Coast ports.”

For the year, Tarrant expects a loss ranging of $102.6 million to $103.1 million on sales of $154 million to $156 million.

Aved said that recently-signed deals with Jessica Simpson and Beyoncé Knowles, as well as a growing private-label business, would boost results through 2005. Last month, the company secured the sublicense for the Jessica Simpson and Sweet Kisses brands in junior casual sportswear and denim. It also signed on to produce young contemporary women's clothing under the House of Dereon brand apparel, founded by Beyoncé Knowles. Jeans will be a key component of each line.The company this year expects to post a profit of $7 million to $11 million on sales of $220 million to $240 million. — Scott Malone

Eroglu Buys Big Star

Eroglu Group, the Turkey-based owners of Colin’s Jeans, has purchased the contemporary jeans and sportswear label Big Star.

“We feel that Big Star has the potential to be very recognizable,” said Mark Schulman, sales manager at Eroglu Group. “We’re going to integrate marketing, design and production.”

Eroglu Group’s global revenues exceed $250 million and it operates more than 150 branded stores in Turkey and Eastern Europe. Schulman said, “The ultimate goal is to build it into a $500 million company worldwide.”

Terms of the purchase were not disclosed.

“They were initially a shareholder and we did production together for almost three years,” said Girhard Mollenkopf, chief executive officer of Big Star. “It was more or less natural that we came together in this way.”

Denim in the Big Star collection wholesales for $48 to $75.

Eroglu Group launched the U.S. Colin’s Jeanswear division two years ago. The average retail price for the Colin’s denim collection is $70. Colin’s, a contemporary lifestyle brand, was founded 20 years ago in Turkey by the Eroglu family. While the company’s foundation is in denim, other categories include sportswear, activewear, outerwear, footwear and accessories for young men and women. U.S. sales for Colin’s are expected to exceed $10 million in $2005.

The purchase of Big Star includes worldwide rights. Big Star has a U.S.-based licensee, Koos Mfg., which owns Adriano Goldschmied. Sales for 2005 are estimated at $50 million.

“Big Star is a very prominent brand in Europe,” Schulman said. “We want to make them a worldwide brand.” — Lauren DeCarlo

Indigo Palms Taps Awitan

Tommy Bahama has named Brian Awitan as national sales manager for women’s at its Indigo Palms Denim Co. division. Awitan is based in Seattle and reports to Don Kerkes, the brand’s president.Awitan, 34, last served as vice president of sales at Modern Amusement. Previously, he did sales stints at Original Penguin and Diesel. The post is a new one at Indigo Palms, which launched in fall 2002.

“The fusion of better denim with lifestyle branding represents one of the biggest opportunities in the marketplace today. — S.M.

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