Byline: CATHERINE M. CURAN
NEW YORK — Guess Inc. said a hike in royalty income from licenses boosted operating earnings 12.6 percent in the first quarter ended March 27. The figures came from a 10-Q filing with the Securities and Exchange Commission. Guess, a privately held company based in Los Angeles, filed the report because of $130 million of debt issued August 1993. Operating earnings in the quarter rose to $28.5 million from $25.3 million, reflecting a hike in royalty income to $8.1 million from $3.5 million and a decrease in selling, general and administrative expenses.
The royalty income increase stemmed from the signing of 12 new licenses and higher royalties from existing licenses.
Gross profit, which excludes licensing income and selling, general and administrative cost, slipped 5.4 percent to $56 million from $59.2 million.
Net earnings fell 4.6 percent to $23.5 million from $24.6 million, reflecting an increase in interest expense to $4.4 million from $29,000 a year ago. Higher interest stemmed from recapitalization, which enabled the firm to buy out the shares of Georges Marciano, the former chief executive officer, who left in in August 1993.
The firm’s remaining three shareholders are his brothers, Maurice Marciano, chairman and ceo; Paul Marciano, president, and Armand Marciano, senior executive vice president. They could not be reached for comment.
Overall sales in the quarter declined 7.4 percent to $114.6 million from $123.8 million. Guess’s policy is to record sales to its own stores at the same wholesale prices charged other customers.
Sales from wholesale operations dipped 1.4 percent to $111.6 million, reflecting the loss of $19.1 million from lines that have been licensed since 1992., as the firm decided to focus wholesale operations on its core men’s and women’s lines.
Excluding sales from the lines that were licensed out, sales climbed 19.1 percent to $109.1 million. This gain was fueled by growth in women’s and men’s wholesale business.
The company expects its licensing program to reduce net sales in 1994, but said the “associated reduction in earnings from such sales will be substantially offset in future years by the increase in royalty income from the new licenses which have minimal related expenses.”
At the retail stores, revenues rose 6.6 percent to $23 million, boosted by stores openings. Same-store sales dropped 10.8 percent, reflecting severe East Coast weather, poor economic conditions and the California earthquake. Of the 12 stores damaged by the earthquake, two remain closed at the quarter’s end. Guess operates 37 retail stores and about 40 outlet stores.
The recapitalization included issuing $130 million 9 1/2 senior subordinated notes due 2003 and borrowing under a revolving credit facility.
— Fairchild News Service