GUESS LOSS MEETS ESTIMATES
Byline: Scott Malone
NEW YORK — Guess Inc. closed out the fourth quarter of 2000 with a $13.1 million net loss, in line with the reduced financial expectations the company spelled out in late January.
The loss for the three months ended Dec. 31 included $15.6 million in pretax charges including inventory writedowns, restructuring and the writedown of fixed assets.
In the prior-year quarter, the company recorded net income of $19.2 million.
Net revenues for the quarter were $196.3 million, up slightly from $195.5 million.
On a conference call with analysts late Thursday, Guess executives acknowledged they were happy to have closed the books on a troubled 12 months.
“Fiscal 2000 was a challenging year for Guess, and I am happy it is behind us,” said Paul Marciano, co-chairman and co-chief executive officer.
Guess started off the year like a rocket, reporting substantial sales and earnings growth and laying out an aggressive retail expansion plan. But by the fourth quarter, a cooling economy mixed with very high inventory levels to leave the company scrambling to clear out merchandise at highly promotional prices.
Things got even trickier in January, when the company warned that it would miss analysts’ expectations for fourth-quarter earnings — then at 7 cents a share — and instead post a substantial loss. At that time, executives including Guess’s newly appointed president and chief operating officer, Carlos Alberini, revealed that they had discovered some accounting errors, which meant they would also be revising previously released figures for the first three quarters.
The loss reported Thursday came out to 30 cents a diluted share, including the charges.
On the conference call, company officials explained that the results left them out of compliance with some of their agreements with their lenders, but assured investors that they had already worked out informal amendments in their loan terms.
“Our bank group has agreed in principle to amend the terms of our credit facility,” said Maurice Marciano, who shares the chairman and ceo titles with his brother Paul.
Maurice Marciano blamed the fourth-quarter showing on the slowdown at retail and some fashion missteps by the company.
“The wholesale business had mixed results,” he said. “Shipments were significantly below expectations for the period as a result of a drastic downtrend in retail sales, mainly in department stores.”
That downtrend led some department store executives to cancel orders, he said, and left overall wholesale shipments up only 1 percent, compared with the double-digit growth the company had seen earlier in the year.
“We missed some opportunities in several product categories, like sweaters and some denim fashion,” he continued.
Paul Marciano said that the company’s aggressive retail expansion — even after putting on the brakes late in the year, Guess closed out 2000 with 212 stores, 53 more than at the start of the year — experienced some problems. In particular, he said, the company’s newer Guess Canada and Guess Kids operations have had soft initial results.
Looking ahead, the company said it would be more cautious in its retail development this year, planning to open no more than 25 stores.
“We are being very selective with real estate expansion,” said Alberini. “We are planning to conserve capital and we are going to be very careful with where we put out capital.”
Alberini also addressed what he said were some of the questions he’s been most frequently asked since joining Guess.
On working with the Marciano brothers: “We work as a team and communicate a lot daily. Maurice and Paul and Armand [Marciano, senior executive vice president] are very passionate about the business and very close to the operation and I would like to keep it that way.”
On his authority at the company: “I feel that I have been given plenty of authority to do my job effectively.”
On Guess’s future: “I see tremendous opportunities for Guess,” both in terms of revenue growth and cutting costs, he said.
He added that keeping costs down will be a major focus for 2001.
“We are restructuring our operations to streamline our cost structure,” he said, adding that the company had put in a place a committee of 30 top executives to analyze costs and operations.
Maurice Marciano said he expects 2001’s results to be boosted by the company’s recent redesign of its core jeans styles, which are now hitting stores.
“It’s all about new finishes, new material, new silhouettes and all that,” he said. “We are experiencing a very, very good response from the customers.”
Despite the redesign, Guess’s immediate results haven’t picked up. The company also said comp-store sales at its own stores were off 16.1 percent in February. Including new stores, sales were up 2.3 percent, to $26 million.
For the year, Guess recorded net income of $16.5 million, or 38 cents a diluted share, down 68.2 percent from $51.9 million, or $1.20 a share, in fiscal 1999. Net revenues were $779.2 million, up 29.9 percent from $599.7 million.
The full-year figures include the company’s restated results for the first three quarters, which in the final analysis are slightly different from the revisions the company offered in January.
First-quarter net income was $14.4 million, compared with the $15.4 million originally reported. In the second quarter, the company netted $6.8 million, not $12.1 million. Third-quarter net was $8.4 million, instead of the $5.6 million previously released.
Prior to the release of the numbers, Guess shares closed at $6.80 on the New York Stock Exchange, off 6 cents. The 52-week low was $3.50 and the high is $33.