Guess Inc. combated currency headwinds and weak traffic trends with fiscal discipline, enabling it to post an unexpected first-quarter profit.
The Los Angeles-based jeanswear and sportswear giant recorded net income of $3.3 million, or 4 cents a diluted share, versus a loss of $2.1 million, or 3 cents, in the year-ago quarter.
The analysts’ consensus estimate was for a loss of 5 cents, and none of the 12 analysts sharing their estimates with Yahoo Finance expected black ink in the quarter.
Revenues fell 8.4 percent, to $478.8 million from $522.5 million, and were flat on a constant currency basis. Wall Street expected higher revenues, with estimates averaging $483.5 million.
Included in the revenue figure was a 5.9 percent decline in comparable sales in the U.S. and Canada, with a 7.5 percent drop in same-store sales partially offset by a 13.8 percent increase in e-commerce sales, to $18.2 million.
“Overall first-quarter results were better than our expectations, mainly driven by tight expense management,” said Paul Marciano, chief executive officer.
Cost of product sales and selling, general and administrative expenses in the quarter declined 9.5 percent and 9.6 percent, respectively, to $313.3 million and $161.1 million. Inventories measured on a year-over-year basis declined 12.4 percent to $327.1 million.
While cognizant of the challenges ahead, Marciano noted improvements in the women’s category in North America and continuing strength for the Marciano brand, where North American comp sales were up in the high-single digits.
“In Europe, our retail stores are now comping up in the midsingle digits,” he said. “We are very encouraged by the first-quarter performance and early reads on the second quarter and we will continue to focus on executing on our strategic initiatives aimed at improving the company’s profitability,” the ceo said.
The North American retail unit, the company’s largest, saw revenues fall 6.2 percent to $214.2 million, while falling 4 percent with the exclusion of currency fluctuation. Europe’s sales fell 13.7 percent to $137.4 million, but were up 8 percent at constant currency. Asian revenues declined 8.7 percent to $64 million, a 6 percent drop at constant currency, while North American wholesale fell 5.2 percent to $37.3 million while rising 1 percent without currency’s effects.
The company, known for being conservative in guidance, expects earnings per share of 12 cents in the second quarter, below the 18 cents analysts had expected for the period. Against analysts’ expectations of full-year EPS of 87 cents, Guess projected a range spanning 86 cents to $1.02. The company expects the effect of currency changes to lower annual EPS by about 45 cents, it said.
Apparently in anticipation of an upside surprise, Guess shares rose 6.2 percent to $18.65 in regular trading on the New York Stock Exchange. After disclosure of the results as the markets closed, shares pulled back 0.8 percent to $18.50.