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Guess Profits Leap

Guess Inc. is shaking off all signs of an economic slowdown at home and abroad.

Guess Inc. is shaking off the economic slowdown at home and abroad, posting double-digit earnings and revenue gains for the second quarter and first half of the year.

The Los Angeles-based company saw earnings vault 43.6 percent to $53.8 million, or 57 cents a diluted share, for the three months ended Aug. 2, compared with earnings of $37.5 million, or 40 cents, in the same period a year ago.

Each of the company’s businesses posted double-digit revenue gains during the quarter, led by a more than a 60 percent surge in Europe and 20 percent increase in the North American retail business. Overall revenues rose 32.7 percent to $515.2 million from $388.3 million. Product sales increased 33.3 percent to $489 million from $366.7 million. Royalties improved 21.7 percent to $26.2 million from $21.5 million.

“Our performance in this difficult U.S. retail environment demonstrates the power of our diversified business model to generate above-average top- and bottom-line growth, even in challenging times,” said Paul Marciano, chief executive officer. “We continue to strengthen our assortments and have made significant improvements toward this goal with several of our product categories including denim, which is, once again, a major focus for us.”

The company’s European business led the charge, with revenues rising 61.5 percent to $174.2 million from $107.9 million. Marciano said knitwear and denim were the strongest performers in the region. Guess has 44 company-owned stores in Europe in addition to 221 stores operated by partners.

One of the company’s more significant feats has been its ability to coax North American consumers to buy at a time when most are feeling the pinch of rising energy prices and a slowing economy. North American retail revenues came in at $242.4 million, a 20.2 percent gain from the $201.6 reported in the same period a year ago. Comparable-store sales were up 8.1 percent, marking the 22nd consecutive quarter of same-store sales growth.

“We now have 48 Marciano stores in the U.S., which are delivering sales per square foot well in excess of $600,” Marciano said.

The company opened 16 stores in North America during the quarter and 35 during the first half. The number of stores in the region at the end of the quarter was 407, up from 347 last year, and management expects to open another 57 units in the U.S. and Canada this year.

The company is also renewing its commitment to denim and will begin offering a cohesive global denim assortment.

“This year we are making denim our number-one focus not only in the U.S., but worldwide,” Marciano said.

He added that expanding the company’s business in Asia would be an “essential part of our strategy.” Management expects the Asian market to generate revenues of $200 million in the next two to three years.

For the six months through Aug. 2, earnings spiked 39.2 percent to $101.6 million, or $1.08 a diluted share, compared with earnings of $73 million, or 78 cents, in the same period a year ago. Revenues increased 31.1 percent to $1 billion from $766.2 million. Sales rose 31.8 percent to $954.7 million from $724.4 million. Royalties rose 18.7 percent to $49.7 million from $41.9 million.