NEW YORK — Receding revenues pushed Guess Inc. into the red in the second quarter of fiscal 2002, but the company did manage to beat analysts’ expectations.
For the three months ended June 29, the Los Angeles-based casual-apparel marketer reported a net loss of $6.4 million, or 15 cents a diluted share. That compares with last year’s profits of $1.5 million, or 3 cents. However, the loss per share did best Wall Street forecasts by 2 cents as well as bettering by 1 cent the higher end of a company-earnings revision issued last month.
Net revenue for the period sunk 21 percent to $119.8 million from $151.7 million a year ago.
Breaking down sales by division, Guess’ retail store sales, including those in Canada, decreased 4 percent to $79.9 million from $83.2 million last year as comparable-store sales stumbled 7.4 percent. The firm’s wholesale business saw sales dive 44.7 percent to $33.1 million from $59.9 million in the prior-year period.
Product sales and net royalties each declined 21 percent, with the former producing $113 million this year compared with $143.1 million last year, and the latter coming in at $6.8 million compared with last year’s royalties of $8.6 million.
"Guess’ performance for the quarter reflects the continuing weakness in the retail marketplace," said chief operating officer Carlos Alberini in a statement. "Within this environment, we are managing our inventories and costs very carefully, and although overall results were lower, our efforts are contributing to improved gross profit margins in our retail business."
Looking for cost efficiencies, Guess’ 21 percent decline in sales was met with a commensurate 20.6 percent drop in the cost of sales to $79.4 million from $100 million a year ago. However, selling, general and administrative expenses cut into the bottom line, growing 8.1 percent to $49.8 percent from $46.1 million last year.
Gross profit decreased to 33.7 percent of net revenue, or $40.4 million, from 34.1 percent of net revenue, or $51.7 million, in last year’s second quarter. While gross profit margins in the wholesale business declined due to higher allowances and increased losses on off-price sales, gross profit margins in the retail segment improved on lower markdowns from improved inventory positions.For the first six months of fiscal 2002, Guess reported a net loss of $10 million, or 23 cents a diluted share. That compares with last year’s earnings of $3.5 million, or 8 cents.
Total revenues for the period slouched 19.8 percent to $258 million from $321.8 million a year ago. Retail sales notched down 2.3 percent to $158.8 million from $162.5 million as same-store sales decreased 5.8 percent. The company’s wholesale business also declined, plunging 41.5 percent to $82.5 million from $141.1 million in the year-ago period.
In guidance, the firm anticipates total revenues for the second half of the year to decline approximately 5 percent from year-ago levels. For the third quarter, Guess anticipates earnings per share of 8 to 10 cents and fourth-quarter EPS of 19 to 21 cents. For the full fiscal year, the company projects EPS of 4 to 8 cents.
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