Guess Inc. pleased Wall Street with a smaller-than-expected decline in third-quarter profits but missed revenue estimates and offered a sober view of the fourth quarter.
In the three months ended Nov. 2, the Los Angeles-based jeanswear firm recorded net income of $20.8 million, or 24 cents a diluted share, 38.9 percent below the $34 million, or 40 cents, reported in the 2013 quarter but above the 18-cent EPS figure expected, on average, by analysts.
Revenues were down 3.9 percent, to $589.9 million from $613.5 million, against expectations for $595.3 million in sales. The firm’s largest business unit, North American retail, reported a sales decline of 4.2 percent to $243.2 million as comps slid 4.8 percent, a combination of a 7 percent decline in same-store sales and a 2.2 percent positive effect from e-commerce. North American retail was the only one of the five business units to register an operating loss, which came in at $10.5 million, but profits were down in Europe, Asia and the firm’s licensing business while rising for North American wholesale.
The largest divisional sales decline came in Europe, where sales were off 5.5 percent to $189.9 million.
“In North America, store traffic and the promotional environment remained headwinds,” said Paul Marciano, chief executive officer. While e-commerce gained 38.4 percent to $17 million in North America, overall trends on the continent “have softened compared to the third quarter. In Europe, softer traffic in the third quarter drove lower retail sales than expected. However, trends have improved so far in the fourth quarter.”
But fourth-expectations are muted. Guess expects EPS of between 53 and 63 cents on revenues of $695 million to $710 million. Prior to the earnings report, analysts on average expected EPS of 69 cents on revenues of $747.1 million.