Fashion firm Guess Inc. , a designer and marketer of apparels and accessories, Tuesday (May 22) reported a 37.6 percent decline in first-quarter profit, hurt mainly by lower European revenues and weak margins. However, Guess’ earnings and revenues for the quarter easily beat analysts’ expectations, helped by improved demand in Asia. Following the news, shares of Guess rose seven percent in after-hours trade.
For the first quarter ended 28 April, Los Angeles-based Guess posted net earnings of US$26.6m, or $0.30 per share from $42.7m or $0.46 per share in the same period last year. On average, 12 analysts polled by Thomson Reuters expected earnings of $0.26 per share for the quarter.
Gross margins dropped to 40.6 percent from 41.9 percent last year. Operating margin declined 520 basis points to 6.8 percent, reflecting higher professional fees, higher selling and distribution expenses and increased marketing costs. Operating earnings slumped 44.8% to $39.1m, which included a $900,000 unfavourable currency translation impact.
Total revenues for the first quarter dropped 2.2 percent to $579.3 million from $592.2 million last year. Analysts estimated revenues of $569.85 million. Its North American stores generated US$251.8m in net revenue, a 1.8% increase on the prior year, while comparable store sales declined 5.5% in US dollars and 5.1% in local currency. Wholesale revenue in Guess’ North American division dropped 3.8% to $43.9m.
European net revenue decreased 9.7% to $189.8m, down 4.6% in local currency. Net revenue from Asia segment advanced around 8 percent to $64.8 million.
Chief Executive Paul Marciano said, “We are pleased to deliver first quarter financial results that exceeded both our top and bottom line expectations, even as economic conditions remained challenging in many markets. We continued to focus our efforts on growing in newer international markets, and we succeeded, expanding in key markets such as China, Germany and Russia… While we did face economic headwinds in southern Europe, our brand remains strong there and our business is stable,” added Marciano. In Europe, revenues dropped about 10 percent to $189.8 million, or 4.6 percent in local currency.”
Meanwhile, Guess backed its full-year 2013 earnings guidance, but lowered its revenue outlook. The company continues to expect full-year earnings in a range of $2.50 to $2.65 per share. Revenue guidance was lowered to a range of $2.70 billion to $2.74 billion, from prior expectation of $2.74 billion to $2.78 billion. Analysts currently expect earnings of $2.59 per share on revenues of $2.74 billion for fiscal year 2013.
Guess also detailed a weak outlook for the second quarter with earnings expected in the range of $0.48 to $0.52 and revenues of $625 million to $635 million. Analysts currently expect earnings of $0.62 per share on revenues of $667.48 million for the second-quarter.
The company approved a quarterly dividend of $0.20 per share, payable on June 22, to shareholders of record on June 6.
GES closed Tuesday’s trading on NYSE at $24.44, down $0.03 or 0.12%, on a volume of 3.3 million shares. The stock, however, gained $1.75 or 7.16% in after-hours trade.