Guess Inc. overcame a shift in its European business to easily beat expectations in its third quarter as the firm offered optimistic guidance for the holidays.
This story first appeared in the December 1, 2009 issue of WWD. Subscribe Today.
In the three months ended Oct. 31, the Los Angeles-based denim and sportswear firm recorded a 1.3 percent gain in profits to $65.1 million, or 69 cents a diluted share. A year ago, the firm’s third-quarter net totaled $64.2 million, or 67 cents a share.
Analysts polled by Yahoo Finance had expected earnings per share of 51 cents on average.
Revenues in the third quarter fell 1 percent to $522.8 million from $527.9 million. Retail revenues rose 1.9 percent, to $239.5 million, while North American same-store sales fell 3.4 percent in the period. Gross margin declined to 45.3 percent of sales from 45.8 percent a year ago.
Chief executive officer Paul Marciano said the company controlled costs and inventories in the quarter to “protect its profitability.”
European revenues fell 9.3 percent to $168.8 million, the result of a shift in pre-collection shipments from the third quarter to second this year, the company said. The firm’s wholesale segment, which includes its Asian business, grew 10 percent to $86.7 million.
Despite the slide, Marciano said Europe still tops Guess’ expansion plans beyond fiscal 2010.
“We strongly believe that Europe can reach $1 billion in sales in the next two to three years,” the executive said on an after-market conference call. “Retail growth remains a major part of that strategy and our goal for the next year is to open 100 stores, Guess stores across all concepts, in Europe.”
Marciano said another of the firm’s goals is to open 60 accessories stores across the globe next year.
For the fourth quarter, the firm said it expects EPS to be between 77 cents and 80 cents on revenues between $585 million and $605 million. Before Guess revealed the outlook, analysts had expected fourth-quarter EPS of 69 cents on revenues of $563.8 million, on average.
For the nine months, Guess’ net income fell 5 percent to $158.4 million, or $1.68 a share, from $166.7 million, or $1.74 a share, in the comparable period. Revenues in the three quarters fell 3 percent to $1.49 billion from $1.53 billion a year ago.