GUESS QUARTER SAGS: Pruning its accounts, Guess Inc. reported profits slumped 23.5 percent in the second quarter ended July 2 and sales dropped 16.3 percent.
Earnings fell to $12.3 million from $16.1 million, according the company's 10K. Guess is a privately held Los Angeles-based company but reports financial information because of its publicly-held debt. Sales in the quarter declined to $92.9 million from $111 million. Revenues from wholesale operations dropped 25.5 percent to $72.4 million, primarily due to a decision to reduce shipments to certain channels of distribution.
Roger Williams, executive vice president and chief financial officer, said Guess decided in 1994 to discontinue sales to stores that "in some cases were financially troubled and in other cases didn't fit the image of the Guess brand anymore."
Guess has also embarked on a campaign to aggressively expand its Guess Retail full-price concept, its company-operated stores. He declined to mention stores Guess pulled out of, but indicated that most were specialty store chains.
"We didn't do it because they were bad retailers, [but] you just continually strive to increase your image in this business," he said.
Guess also said in the 10K that the sales decline partly reflected "the continued sluggish retail environment."
Williams said Guess's business to department stores was flat in the quarter, though he noted that both its men's and women's basics and fashions lines have been holding up well considering the tough retail climate. "We're pretty much flat, which we consider in today's environment to be acceptable. We would like the department stores to be doing more business because we think we'd be getting more if they were doing more," Williams said.
Revenues from retail operations rose 13.1 percent to $35.9 million. At its full-price Guess Retail stores, sales jumped 38.7 percent to $19.3 million, due to new store openings. The company now has 59 Guess Retail stores, adding seven since the start of 1995.
Outlet store sales fell 7 percent to $16.5 million as a result of closing four stores and the continued sluggish outlet market conditions. The company now operates 44 outlet stores.
Royalty income climbed 26.1 percent to $10.6 million due to continued growth in revenues by existing licensees as well as additional licenses.
In the half, profits slid 16.6 percent to $33 million from $39.5 million. Sales were off 8.4 percent to $206.6 million from $225.6 million. Wholesale sales fell 22.8 percent to $161.1 million while retail sales gained 17.4 percent to $64.2 million. Guess Retail sales jumped 46.7 percent to $36.5 million with same-store sales up 6.8 percent, while outlet store sales declined 7.1 percent to $27.7 million.
The company's capital expenditures totaled $12.5 million in the half and Guess intends to spend another $24 million in the second half primarily to expand retail operations.
Meanwhile, to beef up its back-to-school sales in department stores, Guess has expanded its promotions for the period. Five of Guess's retail accounts are coordinating promotions and special events for the manufacturer, many of which include celebrity appearances as well as in-store fashion shows. Last year, the promotion was concentrated at Bloomingdale's.
Among the personalities taking part in this year's events are Andrew Shue, a star of TV's "Melrose Place" and a founder of the grass roots charitable organization Do Something, of which Guess is a sponsor. Shue recently signed Do Something T-shirts at Burdine's in Dadeland, Fla., as a kickoff to back-to-school selling.
In addition, Malik Yoba of "New York Undercover" will appear at Macy's East in Brooklyn on Aug. 20, Yasmine Bleeth from "Baywatch" will be at Macy's Herald Square on Aug. 26, and Dean Cain, of "Lois and Clark," will go to Bullock's Valley Fair in California on Aug. 27. They will focus on promoting the "Do Something" organization.
In addition to the appearances, Guess and the retailers have arranged a host of in-store events.
Bloomingdale's will once again have its "World of Guess" storewide promotion, and all Guess sales associates will wear T-shirts with the motto during the week. Along with in-store signs and point-of-purchase materials, there will be ads in the New York Times and September's Details magazine. Bloomingdale's White Plains unit will host a Guess model search on Sept. 9. Guess merchandise will be in the New York flagship store's Third Avenue windows at the beginning of September.
For Macy's East, events include window displays at the Herald Square flagship here and a party for the opening of the new Guess juniors boutique--the largest in any store in the country--Aug. 24. Guess and Macy's are also sponsoring a fashion show at its Brooklyn store on Aug. 26. The show will be held outdoors, on Fulton Street, which will be closed to traffic. It will feature winners of a Guess models search. At Dayton Hudson stores, Guess chairman Maurice Marciano made his TV debut in a series of 15-second commercials that are airing in DH's department store markets. The TV spots are tagged with the stores' name and also are being run in various departments in the stores. Guess also has the cover and an eight-page spread in a DH department store catalog that will be inserted into some of this Sunday's newspapers, with a combined total circulation of five million.TARGET SIGNS CHEROKEE: Cherokee, the embattled Van Nuys, Calif., sportswear company, announced its intention a few weeks ago to try a new approach to business: private label manufacturing under its own name.
It has now signed its first such agreement with Target Stores, the Minneapolis-based mass retail division of Dayton Hudson Corp. that operates 645 stores in 32 states and has an annual volume of about $12 billion.
Target will have the Cherokee label exclusively in all of its misses', juniors, girls' and special size five-pocket jeans, girls' sportswear, accessories and footwear. The store will also sell Cherokee products in other categories on a nonexclusive basis.
The merchandise is scheduled to ship for fall 1996 selling. Target will handle the design and manufacturing of the goods, but Cherokee will have final approval of design direction.
"The addition of Cherokee casual sportswear in these key areas will be a great complement to our current apparel offerings," said Gregg Steinhafel, executive vice president of merchandising for Target, in a statement. "This is a very strong, well-recognized brand."
A Target spokesman declined to give retail prices or first-year projections.

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