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Guess Posts Drop in Q2 Earnings

Jeans brand’s shares fall 22 percent after annual projection lowered.

The Guess store in Milan.

Investors erased a fifth of Guess Inc.’s market value after the company reported lower second-quarter earnings and cut its outlook for the year.

This story first appeared in the August 24, 2012 issue of WWD.  Subscribe Today.

The jeans brand’s stock fell 22.6 percent Thursday to $25.95 — not far from its 52-week low of $24.23.

Second-quarter earnings attributed to the company declined 29.3 percent to $42.9 million, or 49 cents a share, from $60.7 million, or 65 cents, a year earlier.

Revenues for the three months ended July 28 declined 6.2 percent to $635.4 million from $677.2 million. Comparable-store sales in North America fell 8.5 percent.

Chief executive officer Paul Marciano told analysts on a conference call that the company’s North American retail business was “clearly a disappointment.”

“We did not experience the results that we expected,” Marciano said. “The environment continued to be very promotional and with less profit, especially during the second half of the quarter. The summer months brought a sharp decrease in visitors from Europe in the stores.”

Business was weakest in the company’s stores in tourist locations.

Guess’ weakest category was accessories. “Our product line lacked variety, key volume drivers and did not reflect the improvement we have made,” the ceo said. “We are committed to making the necessary change to reverse this trend and are working with our partners [and] licensees to improve the product offering in our stores.”

Women’s apparel was the strongest category in the brand’s full-priced stores.

Guess now expects diluted earnings per share will range from $2.15 to $2.30, a significant cut from the $2.50 to $2.65 projected in May. Marciano vowed to continue to manage the business “prudently.”

Randal Konik, an analyst at Jefferies, said the company enters the third quarter “amidst an elevated competitive environment, we don’t think the brand is at a point where management can try to not be promotional.”

Guess’ stock drop stood out on a generally bad day for the markets.

The S&P Retail Index fell 0.6 percent, or 3.93 points, to 638.91, as the Dow Jones Industrial Average dropped 0.9 percent, or 115.30 points, to 13,057.46. Also losing ground were Vera Bradley Inc., down 6.5 percent to $24.85; New York & Company Inc., 5.8 percent to $3.75; Sears Holdings Corp., 2.7 percent to $54.42, and Avon Products Inc., 2.7 percent to $15.50.