Guess?, Inc. Reports Third Quarter Results

                  Guess?, Inc. Reports Third Quarter Results

Q3 Fiscal 2013 EPS of $0.43, Compared to EPS of $0.71 in Q3 Fiscal 2012

Provides Q4 EPS Guidance in the Range of $0.85 to $0.95

Updates Full Year EPS Guidance to a Range of $2.05 to $2.15

Declares Special Dividend of $1.20 per Share

PR Newswire

LOS ANGELES, Nov. 28, 2012

LOS ANGELES, Nov. 28, 2012 /PRNewswire/ --Guess?, Inc. (NYSE: GES) today
reported financial results for its third quarter ended October 27, 2012.

Third Quarter Fiscal 2013 Highlights

  oConsolidated revenues decreased 2% to $629 million; up 1% in constant
    dollars
  oAsian revenues increased 16%
  oNorth American Retail revenues decreased 1%; retail comp sales declined 6%
  oEuropean revenues increased 2% in local currency; declined 8% in U.S.
    dollars
  oOperating earnings decreased 40% and operating margin declined 590 basis
    points to 9.2%

This press release contains certain non-GAAP, or adjusted, financial measures,
which exclude a settlement charge incurred during the second quarter of fiscal
2012. A reconciliation of reported GAAP results to comparable non-GAAP results
is provided in the accompanying tables and discussed under the heading
"Presentation of Non-GAAP Information" below.

Third Quarter Fiscal 2013 Results

For the third quarter of fiscal 2013, the Company generated net earnings of
$36.6 million, a 44.7% decrease compared to net earnings of $66.3 million for
the third quarter of fiscal 2012. Diluted earnings per share decreased 39.4%,
to $0.43, compared to diluted earnings per share of $0.71 for the prior-year
quarter.

Paul Marciano, Chief Executive Officer, commented, "Third quarter earnings
were consistent with our guidance but fell short of our operational goals, as
economic pressures impacted consumer confidence in most of our markets. Our
European business was stronger at the beginning of the quarter, though
business softened toward the end of the period. We posted solid double digit
growth in Asia. In North America, our key strategies remain relevant as we
focus on driving traffic to the stores through enhanced customer engagement
initiatives and elevating the brand with quality."

Mr. Marciano continued, "We do expect that the current market conditions in
the global economy will continue for some time and we are more cautious on
near term customer demand trends. Accessories performance, specifically
handbags and watches, have been a top priority and I am very confident of
these categories going forward. Our goal is to retain our high-quality
standards. Meanwhile, our team is focused on shortening the development cycle
of a large portion of our products to a fast track calendar to deliver current
trends at the right time, in addition to our iconic denim lines for men and
women that we have offered for the last 30 years."

Mr. Marciano concluded, "We have a strong financial position and will run our
business proactively to adapt to the existing economic climate, manage our
expenses and inventories tightly and reallocate capital in growth regions of
the world, specifically Eastern and Northern Europe as well as Asia. We plan
to evaluate new strategies to drive growth and profitability and improve the
performance of our stores in the U.S. and in Canada. At the same time, with
our strong financial position, our goal is to focus on delivering balanced
returns to our shareholders, including through our dividend and share
repurchase programs."

Total net revenue for the third quarter of fiscal 2013 decreased 2.2% to
$628.8 million, from $642.8 million in the prior-year quarter. In constant
dollars, total net revenue increased 1.2%.

  oThe Company's retail stores in North America generated revenue of $262.1
    million in the third quarter of fiscal 2013, a 1.3% decrease from $265.6
    million in the same period a year ago. Comparable store sales decreased
    6.0% for the third quarter of fiscal 2013, compared to the same period a
    year ago. The Company directly operated 513 retail stores in the United
    States and Canada at the end of the third quarter of fiscal 2013 versus
    495 stores a year earlier.
  oNet revenue from the Company's Europe segment decreased 8.3% to $202.6
    million in the third quarter of fiscal 2013, compared to $221.0 million in
    the prior-year period. In local currency, net revenue increased 1.7%.
  oNet revenue from the Company's Asia segment increased 15.5% to $74.8
    million in the third quarter of fiscal 2013, from $64.8 million in the
    prior-year period. In constant dollars, net revenue increased 15.6%.
  oNet revenue from the Company's North American Wholesale segment increased
    1.0% to $57.9 million in the third quarter of fiscal 2013, compared to
    $57.3 million in the prior-year period.
  oLicensing segment net revenue decreased 7.6% to $31.5 million in the third
    quarter of fiscal 2013, from $34.0 million in the prior-year period.

Operating earnings for the third quarter of fiscal 2013 decreased 40.1% to
$58.1 million (including a $2.4 million unfavorable currency translation
impact) from operating earnings of $97.0 million in the prior-year period.
Operating margin in the third quarter declined 590 basis points to 9.2%,
compared to operating margin of 15.1% in the prior-year quarter. The lower
operating margin primarily reflects the impact of higher occupancy and selling
costs in Europe due to retail expansion, negative same store sales on the
Company's fixed cost structure and increased investments in advertising. In
addition, product margins were lower, primarily driven by promotions in North
America and the effect of pricing parity changes in Canada.

Other net expense, which primarily includes net unrealized mark-to-market
losses on foreign currency contracts and balances, partially offset by net
unrealized gains on non-operating assets, was $0.2 million for the third
quarter of fiscal 2013. This compares to other net income of $1.9 million in
the prior-year quarter.

The Company's reported effective tax rate increased to 34.8% in the third
quarter of fiscal 2013, from 32.3% for the third quarter of the prior year.

Nine-Month Period Results

Net earnings for the nine months ended October 27, 2012 were $106.2 million, a
decrease of 43.3% compared to adjusted net earnings of $187.2 million for the
nine months ended October 29, 2011. The prior-year adjusted net earnings
excluded a settlement charge of $19.5 million ($17.6 million net of the
related tax impact) associated with the settlement of the Company's
relationship with one of its former European service providers. Diluted
earnings per share declined 39.8% to $1.21 per share in the first nine months
of the 2013 fiscal year compared to adjusted diluted earnings per share of
$2.01 in the comparable nine-month period last year. On a GAAP basis, for the
first nine months of fiscal 2013, net earnings decreased 37.4% and diluted
earnings per share decreased 33.5%.

Total net revenue for the first nine months of fiscal 2013 decreased 3.6% to
$1.84 billion from $1.91 billion in the prior-year period. In constant
dollars, total net revenue increased 0.6%.

  oThe Company's retail stores in North America generated revenue of $766.9
    million in the first nine months of fiscal 2013, a 0.9% decrease from
    $774.1 million in the same period a year ago. Comparable store sales
    decreased 6.3% in local currency and 6.7% in U.S. dollars for the nine
    months ended October 27, 2012, compared to the nine months ended October
    29, 2011.
  oNet revenue from the Company's Europe segment decreased 11.2% to $639.3
    million in the first nine months of fiscal 2013, compared to $720.1
    million in the prior-year period. In local currency, Europe segment
    revenues decreased 1.6%.
  oNet revenue from the Company's Asia segment increased 14.6% to $206.5
    million in the first nine months of fiscal 2013, compared to $180.2
    million in the prior-year period. In constant dollars the increase was
    16.5%.
  oNet revenue from the Company's North American Wholesale segment decreased
    2.3% to $143.4 million in the first nine months of fiscal 2013, from
    $146.8 million in the prior-year period.
  oLicensing segment net revenue decreased 4.0% to $87.4 million in the first
    nine months of fiscal 2013, from $91.0 million in the prior-year period.

Operating earnings for the first nine months of fiscal 2013 decreased 45.0% to
$154.6 million (including an $8.5 million unfavorable currency translation
impact) from adjusted operating earnings of $280.9 million in the prior-year
period. Operating margin for the first nine months of fiscal 2013 declined
630 basis points to 8.4% compared to adjusted operating margin of 14.7% in the
prior-year period. The decline in operating margin primarily reflects the
impact of higher occupancy and selling costs in Europe, negative same store
sales on the Company's fixed cost structure, and increased investments in
advertising and marketing. Product margins for the year-to-date period were
lower compared to the prior-year period driven by lower margin in North
American Retail and unfavorable currency impact in Europe. GAAP operating
earnings decreased 40.9% and GAAP operating margin declined 530 basis points.

Other net income, which primarily includes net unrealized mark-to-market gains
on foreign currency contracts and balances, and net unrealized gains on
non-operating assets, was $5.8 million for the first nine months of fiscal
2013. This compares to other net expense of $5.4 million in the prior-year
period.

The Company's effective tax rate was 33.0% for the first nine months of both
fiscal 2013 and fiscal 2012.

Outlook

The Company's expectations for the fourth quarter of fiscal 2013 ending
February 2, 2013, are as follows:

  oConsolidated net revenues are expected to range from $780 million to $800
    million.
  oOperating margin is expected to be between 14.5% and 15.5%.
  oDiluted earnings per share are expected to be in the range of $0.85 to
    $0.95.

The Company updated its outlook for the fiscal year ending February 2, 2013,
which is now as follows:

  oConsolidated net revenues are expected to range from $2.62 billion to
    $2.64 billion.
  oOperating margin is expected to be between 10.0% and 10.5%.
  oDiluted earnings per share are expected to be in the range of $2.05 to
    $2.15.

Dividends

The Company also announced today that its Board of Directors has approved a
quarterly cash dividend of $0.20 per share on the Company's common stock. The
Board of Directors has also approved a special cash dividend of $1.20 per
share to be paid with the regular quarterly dividend. The combined dividends
will be payable on December 28, 2012 to shareholders of record at the close of
business on December 12, 2012.

Presentation of Non-GAAP Information

The financial information presented in this release includes both GAAP and
non-GAAP measures. The "non-GAAP" or "adjusted" financial measures exclude
the impact of a settlement charge incurred during the second quarter of fiscal
2012. In July 2011, the Company experienced a temporary disruption in its
European supply chain, related to one of its service providers. The Company
subsequently entered into an agreement to terminate the relationship with that
provider, resulting in a $19.5 million settlement charge in the second quarter
of fiscal 2012.

The Company has excluded this settlement charge, and related tax impact, from
its adjusted financial measures primarily because it does not believe such
charge reflects the Company's ongoing operating results or future outlook.
The Company believes that these adjusted financial measures are useful as an
additional means for investors to evaluate the comparability of the Company's
operating results when reviewed in conjunction with the Company's GAAP
financial statements. A reconciliation of reported GAAP results to comparable
non-GAAP results is provided in the accompanying tables. The non-GAAP measures
are provided in addition to, and not as alternatives for, the Company's
reported GAAP results.

This release also includes certain constant currency financial information.
Foreign currency exchange rate fluctuations affect the amount reported from
translating the Company's foreign revenues and expenses into U.S. dollars.
These rate fluctuations can have a significant effect on reported operating
results under GAAP. The Company provides constant currency information to help
investors assess how our businesses performed excluding the effects of changes
in foreign currency translation rates. To calculate revenues and earnings from
operations on a constant currency basis, operating results for the current
year period for entities reporting in currencies other than U.S. dollars are
translated into U.S. dollars at the average exchange rates in effect during
the comparable period of the prior year. The constant currency calculations do
not adjust for the impact of revaluing specific transactions denominated in a
currency that is different to the functional currency of that entity when
exchange rates fluctuate. The constant currency information presented may not
be comparable to similarly titled measures reported by other companies.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on November 28, 2012
to discuss the news announced in this press release. A live webcast of the
conference call will be accessible at www.guess.com via the "Investor
Relations" link. The webcast will be archived on the website for 30 days.

About Guess?

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collection
of contemporary apparel, denim, handbags, watches, footwear and other related
consumer products. Guess? products are distributed through branded Guess?
stores as well as better department and specialty stores around the world. As
of October 27, 2012, the Company directly operated 513 retail stores in the
United States and Canada and 312 retail stores in Europe, Asia and Latin
America. The Company's licensees and distributors operated an additional 837
retail stores outside of the United States and Canada. For more information
about the Company, please visit www.guess.com.

Forward Looking Statements

Except for historical information contained herein, certain matters discussed
in this press release, including statements concerning the Company's
strategies, goals, expectations and future prospects, as well as guidance for
the fourth quarter and full year of fiscal 2013, are forward-looking
statements that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements, which
are frequently indicated by terms such as "expect," "will," "goal,"
"strategy," "believe," "continue," "outlook," "plan" and similar terms, are
only expectations, and involve known and unknown risks and uncertainties,
which may cause actual results in future periods to differ materially from
what is currently anticipated. Factors which may cause actual results in
future periods to differ materially from current expectations include, among
others: our ability to maintain our brand image and reputation; domestic and
international economic conditions, including economic and other events that
could negatively impact consumer confidence and discretionary consumer
spending; changes in the competitive marketplace and in our commercial
relationships; our ability to anticipate consumer preferences, effectively
operate our various retail concepts and effectively manage inventories; our
ability to successfully implement our growth strategies and to continue to
expand or grow our business; unexpected obligations arising from litigation,
tax and other regulatory proceedings; risks associated with our foreign
operations, such as violations of laws prohibiting improper payments and the
burdens of complying with a variety of foreign laws and regulations; and
changes in economic, political, social and other conditions affecting our
foreign operations and sourcing, including currency fluctuations, global tax
rates and the current European economic crisis. In addition to these factors,
the economic, technological, managerial, and other risks identified in the
Company's most recent annual report on Form 10-K and other filings with the
Securities and Exchange Commission, including but not limited to the risk
factors discussed therein, could cause actual results to differ materially
from current expectations. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

Contact: Guess?, Inc.
         Investor Relations
         (213) 765-5578



Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(amounts in thousands, except per share data)
               Three Months Ended              Nine Months Ended
               October 27,     October 29,     October 27,       October 29,
               2012            2011 ^(2)       2012              2011 ^(2)
               $       %       $       %       $         %       $         %
Product sales  $       95.0%   $       94.7%   $         95.3%   $         95.2%
               597,374         608,777         1,756,123         1,821,198
Net royalties  31,454  5.0%    34,026  5.3%    87,364    4.7%    91,008    4.8%
Net revenue    628,828 100.0%  642,803 100.0%  1,843,487 100.0%  1,912,206 100.0%
Cost of        381,219 60.6%   367,202 57.1%   1,109,242 60.2%   1,091,119 57.1%
product sales
Gross profit  247,609 39.4%   275,601 42.9%   734,245   39.8%   821,087   42.9%
Selling,
general and    189,492 30.2%   178,632 27.8%   579,686   31.4%   540,193   28.3%
administrative
expenses
Settlement     -       0.0%    -       0.0%    -         0.0%    19,463    0.9%
charge
Earnings from  58,117  9.2%    96,969  15.1%   154,559   8.4%    261,431   13.7%
operations
Other income
(expense):
  Interest     (424)   (0.1%)  (775)   (0.1%)  (1,205)   (0.0%)  (1,539)   (0.1%)
  expense
  Interest     -       0.0%    661     0.1%    1,509     0.0%    2,433     0.1%
  income
  Other, net   (245)   (0.0%)  1,868   0.3%    5,765     0.3%    (5,437)   (0.3%)
Earnings
before income  57,448  9.1%    98,723  15.4%   160,628   8.7%    256,888   13.4%
taxes
Income taxes   19,989  3.1%    31,877  5.0%    53,007    2.9%    84,648    4.4%
Net earnings   37,459  6.0%    66,846  10.4%   107,621   5.8%    172,240   9.0%
Net earnings
attributable
to             812     0.2%    551     0.1%    1,429     0.0%    2,606     0.1%
noncontrolling
interests in
subsidiaries
Net earnings
attributable   $      5.8%    $      10.3%   $        5.8%    $        8.9%
to Guess?,     36,647          66,295          106,192          169,634
Inc.
Net earnings per common share attributable to common
stockholders:
  Basic        $            $            $             $    
               0.43            0.71            1.21             1.83
  Diluted      $            $            $             $    
               0.43            0.71            1.21             1.82
Weighted average common shares outstanding attributable to
common stockholders:
  Basic        84,408          92,011          86,857            91,835
  Diluted      84,702          92,338          87,156            92,279
  Adjusted
  earnings                                     $                $ 
  from                                         154,559  8.4%    280,894  14.7%
  operations
  ^(1)
  Adjusted net
  earnings                                     $                $ 
  attributable                                 106,192  5.8%    187,247  9.8%
  to Guess?,
  Inc. ^(1)
  Adjusted
  diluted
  earnings per
  common share                                 $             $    
  attributable                                 1.21             2.01
  to common
  stockholders
  ^(1)

Notes:
     The adjusted results reflect the exclusion of the settlement charge (and
     related taxes where applicable) recorded during the nine month period
 (1) ended October 29, 2011. No adjustments have been made to the current-year
     period. A complete reconciliation of actual results to adjusted results
     is presented in the table entitled "Reconciliation of GAAP Results to
     Adjusted Results."
     For the three and nine month periods ended October 29, 2011, the Company
     reclassified certain distribution costs from selling, general and
 (2) administrative expenses to cost of product sales to conform to current
     period presentation. The reclassification had no impact on previously
     reported earnings from operations, net earnings or net earnings per
     share.



Guess?, Inc. and Subsidiaries
Reconciliation of GAAP Results to Adjusted Results
(amounts in thousands, except per share data)
The following table provides reconciliations of reported GAAP earnings from
operations to adjusted earnings from operations and reported GAAP net earnings
attributable to Guess?, Inc. to adjusted net earnings attributable to Guess?,
Inc. for the nine months ended October 29, 2011.

                                                        Nine Months Ended
                                                        October 29,
                                                        2011
                                                                      % of
                                                        $             Revenues
Reported GAAP earnings from operations                  $  261,431   13.7%
 Add back settlement charge ^(1)                       19,463
Adjusted earnings from operations                       $  280,894   14.7%
Reported GAAP net earnings attributable to Guess?, Inc. $  169,634   8.9%
 Add back settlement charge ^(1)                       19,463
 Less income tax on settlement charge^(2)              (1,850)
Total adjustments affecting net earnings attributable   17,613
to Guess?, Inc.
Adjusted net earnings attributable to Guess?, Inc.      $ 187,247    9.8%
Adjusted diluted earnings per common share attributable $    2.01
to common stockholders:
Weighted average common shares outstanding attributable
to common stockholders:
         Basic                                          91,835
         Diluted                                        92,279

Notes:
     In July 2011, the Company experienced a temporary disruption in its
     European supply chain, related to one of its service providers. The
(1)  Company subsequently entered into an agreement to terminate the
     relationship with that provider, resulting in a settlement charge in the
     second quarter of fiscal 2012, impacting the nine months ended October
     29, 2011. No adjustments have been made to the current-year period.
     The income tax effect of the settlement charge is based on the Company's
(2)  assessment of deductibility using the statutory tax rate of the tax
     jurisdiction in which the charge was incurred.



Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(dollars in thousands)
                   Three Months Ended           Nine Months Ended
                   October 27,  October   %     October 27,  October 29,  %
                                29,
                   2012         2011      chg   2012         2011         chg
Net revenue:
 Europe            $           $        -8%   $           $           -11%
                   202,594     221,041        639,326     720,068
 North American    262,064      265,637   -1%   766,874      774,147      -1%
 Retail
 Asia              74,838       64,782    16%   206,499      180,152      15%
 North American    57,878       57,317    1%    143,424      146,831      -2%
 Wholesale
 Licensing         31,454       34,026    -8%   87,364       91,008       -4%
                   $           $        -2%   $ 1,843,487  $ 1,912,206  -4%
                   628,828     642,803
Earnings (loss)
from operations:
 Europe before     $          $       -57%  $          $           -61%
 settlement charge 14,572      34,152         51,675      131,014
 Europe settlement -            -               -            (19,463)
 charge, pre-tax
 Europe including  14,572       34,152    -57%  51,675       111,551      -54%
 settlement charge
 North American    8,952        27,533    -67%  42,703       79,077       -46%
 Retail
 Asia              7,799        8,248     -5%   17,693       20,205       -12%
 North American    14,888       16,013    -7%   31,935       37,649       -15%
 Wholesale
 Licensing         27,103       30,698    -12%  74,558       81,188       -8%
 Corporate         (15,197)     (19,675)  -23%  (64,005)     (68,239)     -6%
 Overhead
                   $          $       -40%  $           $           -41%
                   58,117      96,969         154,559     261,431
Operating margins:
 Europe before     7.2%         15.5%           8.1%         18.2%
 settlement charge
 Europe including  7.2%         15.5%           8.1%         15.5%
 settlement charge
 North American    3.4%         10.4%           5.6%         10.2%
 Retail
 Asia              10.4%        12.7%           8.6%         11.2%
 North American    25.7%        27.9%           22.3%        25.6%
 Wholesale
 Licensing        86.2%        90.2%           85.3%        89.2%
 Total Company
 before settlement 9.2%         15.1%           8.4%         14.7%
 charge
 Total Company
 including         9.2%         15.1%           8.4%         13.7%
 settlement charge



Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
                              October 27,    January 28,      October 29,
                              2012            2012             2011
ASSETS
Cash and cash equivalents     $   287,288  $   491,805    $   426,725
Short-term investments        7,348           4,060            4,082
Receivables, net              332,440         340,602          376,502
Inventories                   422,304         328,602          385,399
Other current assets          76,784          96,413           84,017
Property and equipment, net   356,396         348,885          352,514
Other assets                  260,508         234,108          231,961
     Total Assets             $  1,743,068   $ 1,844,475     $ 1,861,200
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of borrowings $           $     2,030  $     2,131
and capital lease obligations 1,776
Other current liabilities     395,044         418,006          425,596
Capital lease obligations     8,739           10,206           11,372
Other long-term liabilities   221,373         211,675          174,519
Redeemable and nonredeemable  15,892          26,928           25,588
noncontrolling interests
Guess?, Inc. stockholders'    1,100,244       1,175,630        1,221,994
equity
     Total Liabilities and    $  1,743,068   $ 1,844,475     $ 1,861,200
     Stockholders' Equity



Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
                                               Nine Months Ended
                                               October 27,     October 29,
                                               2012            2011
Net cash provided by operating activities      $    96,002  $   149,948
Net cash used in investing activities          (96,782)        (103,775)
Net cash used in financing activities          (200,150)       (52,510)
Effect of exchange rates on cash               (3,587)         6,025
Net decrease in cash and cash equivalents      (204,517)       (312)
Cash and cash equivalents at the beginning of  491,805         427,037
the year
Cash and cash equivalents at the end of the    $   287,288   $   426,725
period
Supplemental information:
Depreciation and amortization                  $    66,280  $    59,153
Rent                                           $   198,997   $   184,798



Guess?, Inc. and Subsidiaries
Retail Store Data
International Store Count
                          As of October 27, 2012     As of October 29, 2011
                          Total   Directly Operated  Total   Directly Operated
Region                    Stores  Stores             Stores  Stores
 United States and Canada 513     513                495     495
 Europe and the Middle    610     234                547     171
 East
 Asia                     460     49                 408     39
 Central and South        79      29                 67      22
 America
                          1,662   825                1,517   727



Guess?, Inc. and Subsidiaries
Retail Store Data
U.S. and Canada
                                                Nine Months Ended
                                                October 27,  October 29,
                                                2012         2011
Number of stores at the beginning of the year   504          481
                Store openings                  24           25
                Store closures                  (15)         (11)
Number of stores at the end of the period       513          495
Total store square footage at the end of the    2,370,000    2,270,000
period



SOURCE Guess?, Inc.

Website: http://www.guess.com
 
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