GUESS NET OFF IN 3RD QUARTER; JEANS PINCH BLAMED

NEW YORK — Blaming competitive pressures in the branded basic jeanswear business, Guess Inc. reported third-quarter earnings fell 19.7 percent to $13.1 million, or 31 cents a share, from $16.3 million, or 38 cents, a year earlier.
Year-ago earnings were adjusted for the company’s August 1996 initial public offering.
Sales for the three months ended Sept. 28 declined 7.8 percent to $142.4 million from $154.5 million. Product sales slipped 9 percent to $126.9 million from $139.5 million, although licensing income was ahead 3.2 percent to $15.4 million.
“The third quarter was challenging, with results reflecting the ongoing effects of a tough retail environment, competitive pressures in branded basic jeanswear and soft performance in Southeast Asia,” Maurice Marciano, chairman and chief executive officer, said in a statement. “In light of this, as previously announced, we have implemented a plan to improve productivity and have identified about $8 million in expected salary and administrative savings.”
He also noted that the firm has redesigned all its marketing materials, including a new logo and new in-store displays. “Our wholesale product mix has been diversified to expand non-denim, fashion-oriented apparel, including a strong selection of knit tops,” Marciano said. “In our licensing division, we are carefully evaluating the performance of all licensees and have discontinued underperforming ones or have brought others back in-house.”
In addition, Guess has reviewed its retail performance and expects to close six underperforming stores. “We believe this restructuring will make Guess more efficient and productive, while maintaining all elements key to the growth of our company,” he said.
Guess noted that as a result of these initiatives, fourth-quarter operating results will include about $1.9 million, or 3 cents a share, in one-time expenses.
“These expenses primarily reflect charges related to the closing of the underperforming stores, discontinued lease obligations and nominal severance costs,” Marciano said. Looking at the remainder of the business, he noted that Guess continues to experience strength in its European operation and its key licensing businesses. “Our new shop-in-shop concepts and recently opened New York flagship have been well received,” he said.
For the nine months, after a $3.9 million accounting gain, earnings fell 2 percent to $39.6 million, or 92 cents a share, from $40.4 million, or 95 cents, which included a $3.6 million charge related to the IPO. Overall, sales were down 3.7 percent to $396.7 million from $411.9 million. Royalty income dipped 1.7 percent to $39.6 million from $40.3 million, and product sales slipped 3.9 percent to $357.1 million.

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