GUESS OPERATING EARNINGS OFF 15.1% IN FIRST QUARTER

NEW YORK — With dragging sales in its domestic wholesale business and full-priced retail stores, Guess Inc.’s first-quarter earnings dropped 15.1 percent before a nonrecurring gain.
Guess earned $14.1 million, or 33 cents, before a $4 million accounting credit, down from $16.6 million, or 39 cents, a year ago.
After the gain related to the accounting of product display fixtures in department stores, earnings in the latest quarter were $18 million, or 42 cents.
Revenues inched up 0.6 percent to $135.7 million from $134.9 million. Product sales dipped 0.5 percent to $122.7 million from $123.3 million, while licensing royalties rose 12.4 percent to $13.1 million from $11.6 million.
Gross margins fell to 45.4 percent of sales from 47.8 percent a year ago.
However, the company reported that selling, general and administrative expenses as a percentage of sales improved to 25.6 percent from the 26.1 percent reported in the year-earlier period.
Maurice Marciano, chairman and chief executive officer of the company, remarked in a statement, “Our domestic wholesale business decreased by 10 percent in the face of increased competition from strong brand-name companies who have recently entered the status denim sector.”
Marciano added, “We believe recent actions taken, such as the repurchase of our knitwear license, our new shop-in-shop fixtures, our new advertising campaign and our new pricing structure,” will help the company’s domestic wholesale business in the remainder of the year.
Marciano noted the company posted gains in its retail business, domestic product licensing business and international wholesale and licensing businesses.
Net revenue at Guess’s retail division rose 5.4 percent, reflecting store openings, but same-store sales were flat.
According to Marciano, the company’s full-priced retail stores were hurt by “a shortfall in product delivery which primarily resulted from fabric which did not meet the company standards.”
He said, “Excluding the effect of these one-time production problems, we believe comparable-store sales would have increased.”
Marciano also remarked that the company is continuing to see increases from its various international licensees.

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